Protecting your income and planning for retirement
Unlike employees, self-employed workers don’t have employer benefits such as sick pay, workplace pensions, or death-in-service cover. That’s why financial planning is not just important, it’s essential.
The growing self-employed workforce
Self-employment plays a major role in the UK economy. Recent data (2025) shows:
- Around 4.38 million people in the UK are self-employed
- This represents roughly 16.5% of the workforce
- The most likely age group to be self-employed are those aged 65 or over
- For nearly 3 million people, being self-employed is their sole income source
Why financial planning matters more when you’re self-employed
1. You are responsible for your own safety net
Employees often receive:
- Sick pay
- Employer pension contributions
- Life cover through work
- Paid annual leave
Self-employed people typically receive none of these benefits, meaning their income can stop immediately if they are unable to work.
Without planning, this can lead to serious financial stress.
2. Income can be irregular
Self-employment income often fluctuates month to month.
This makes it essential to:
- Build emergency savings
- Budget carefully
- Protect against unexpected interruptions
Financial planning helps create stability even when earnings vary.
The importance of protection and insurance for the self-employed
One of the biggest risks for self-employed individuals is the loss of income due to illness or injury. When you’re juggling your finances, this may seem like an expenditure you can put off but it really is vital.
Income protection insurance
This is one of the most important types of cover for the self-employed.
It can provide:
- Regular payments if you cannot work due to illness
- Financial stability during recovery
- Protection for household expenses
Without the benefit of employer sick pay, this type of protection is essential.
Life insurance
If you have dependants, life cover can ensure:
- Your family is financially secure
- Debts such as mortgages can be repaid
- Living costs can continue to be met
Critical illness cover
This provides a lump sum payment if you are diagnosed with a serious condition, helping cover:
- Medical costs
- Loss of income
- Lifestyle adjustments
Retirement planning challenges for the self-employed
One of the biggest financial risks that self-employed people face is under-saving for retirement.
Unlike employees, self-employed individuals:
- Do not receive workplace pension contributions
- Must actively plan their own retirement income
- May prioritise business investment over long-term savings
This can create a retirement gap.
Research shows self-employment is particularly common among older workers: nearly one quarter of self-employed people are aged 60 or over. This highlights a key issue: many people may remain working later in life due to insufficient pension savings.
How financial planning helps self-employed workers
A structured financial plan can help you:
Protect your income: through appropriate insurance and emergency savings.
Build retirement security: using pensions, ISAs, and long-term investments.
Manage tax efficiently: planning ahead for tax liabilities and allowances.
Create financial stability: even during income fluctuations.
Steps to consider if you, or a loved one, are self-employed
1. Build an emergency fund
Ideally covering 3 to 6 months of expenses.
2. Review protection needs
Ensure income protection, life cover, and critical illness cover are in place.
3. Start pension contributions early
Even small regular contributions can grow significantly over time.
4. Seek professional advice
An independent financial adviser can tailor a plan to your unique income and goals.
Final thoughts
Self-employment offers independence however it also requires greater financial responsibility. Without employer benefits, planning for protection and retirement becomes even more critical.
Taking proactive steps today can help ensure long-term financial security and peace of mind – contact us today to start building a secure financial future.
Sources and further reading:
- https://www.statista.com/statistics/318234/united-kingdom-self-employed/
- https://www.statista.com/statistics/318457/self-employment-by-region-uk/
- https://www.statista.com/statistics/318220/full-time-self-employment-in-the-uk/
- https://restless.co.uk/press/number-of-self-employed-people-aged-60-and-older-hits-record-levels/
Disclaimer: information is based on publicly available data and government announcements at the time of writing (March 2026) and may be subject to change.