Self-employed pensions

When building your business is all down to you, so is saving for your retirement

Which type of pension is right for you?

Pensions are a long-term investment. The retirement benefits you receive from your pension plan will depend on a number of factors including the value of your plan when you decide to take your benefits, which isn’t guaranteed and can go down as well as up. The value of your plan could fall below the amount(s) paid in.

Make the most of tax relief

For every £80 you put into your pension, HMRC will usually add an extra £20. If you’re a higher or additional rate taxpayer, you could also benefit from extra tax relief through self-assessment. Tax treatment depends on individual circumstances and may be subject to change.

How a Bank of Scotland Personal Pension could be a smart business move

Discover how planning for your future today could make things easier when you decide to retire.

1. You’ll get tax benefits when paying in expandable section
Regularly contributing to your pension is a way of keeping your tax bill to a minimum.

Personal Pensions will protect your money from tax, meaning you won’t pay income tax or capital gains on your investments. But unlike savings accounts and ISAs, the government gives you tax relief on the money you pay into your pension.

The way you claim this tax relief depends on how your business is set up.

If you’re a sole trader (or part of a partnership)
- You can make contributions from your income (after-tax).
- HMRC provide tax relief on your contributions at the basic rate, which for 2024/25 is 20%.
- Higher and additional rate taxpayers can claim more through self-assessment.
- Remember there are limits to what you can pay in - please see our Pensions Explained page for more details.
If you work for your own limited company
- You can also make employer contributions directly from your company (only available for SIPP accounts). These payments will be gross of tax.
- This will have the effect of reducing your profits and reducing your corporation tax liability.
- Also, you won’t pay income tax on any money paid directly into your pension.
2. You get tax benefits when taking money out expandable section

When you reach your planned retirement age, you can access your pension in several ways, taking up to 25% as a tax-free lump sum. The rest is subject to your standard level of income tax.

How and when you take your pension depends on what you want for your retirement. Please see the Retirement options page for more information.
3. You’re in control of your contributions expandable section

If you’re self-employed, making regular contributions to a pension can feel like a significant commitment. Especially if your earnings fluctuate and cash flow is always on your mind.

With our Ready-Made Pension, you can start by contributing just £150 a month (including tax relief) and even less with our SIPP from just £1. Plus, you can stop or increase the amount at any time and top up with lump sums when business is going well.

You don’t need to choose between investing in your business or investing in your pension. It’s good business to do both.
4. It’s a way of building another source of income expandable section

Nobody wants to work forever. As you get older, you’ll probably want or need to slow down. And that can be tricky if your business is your only source of income.

By saving into one of our Personal Pensions, you’re essentially creating another source of income to support you in retirement. It means that if you want to keep on working you can do so because you want to – not because you need to.
5. You’re giving your money the best chance of growing expandable section

The rising cost of living could potentially eat away at the spending power of your money over time.

It’s important to give your long-term savings the best chance to grow and putting your money into a pension does just that.

The money you put into a pension is invested in different assets, such as shares and bonds. Over time, these tend to generate higher returns than cash left in a standard bank account.

And because HMRC tops up your personal contributions by adding back the basic rate of tax, more of your money is invested. This could help your pension grow even more.
6. Add old pensions from previous employers expandable section

If you were employed before starting your own business, you may have one or more old pensions you’ve left untouched.

You might be able to transfer those pensions into your Bank of Scotland Pension. Combining your pensions makes it easier to keep track of your retirement savings.
7. Your loved ones could inherit your pension tax-free expandable section

After years of working, many of us hope to make the most of our retirement – whatever that looks like for you.

When you die, it’s good to know that your loved ones can inherit your pension.

If you die before the age of 75 your beneficiaries can normally access all the money you’ve saved, without paying any income tax.

If you’re 75 or over when you die, your beneficiaries may have to pay income tax depending on how they access the pension.

Important note: Pensions will be included in a person's estate for inheritance tax purposes from April 2027.

Investing in pensions

Here’s an example of how a Personal Pension could work for you

If you invest £10,000 initially and contribute £250 monthly from age 25 (assuming an annual account charge of 0.3%), by age 65 you could have roughly:

£245,000 if markets achieve a low growth of 3% per year
£415,000 if markets achieve medium growth of 5% per year
£970,000 if markets achieve higher growth of 8% per year

Graph for illustration purposes.

Please note that this graph is a guide for illustration purposes only and not a reliable indicator of future performance.

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