Let’s talk about…self-employment

Opting for self-employment is something a growing number of women are doing in an attempt to obtain a better work-life balance and ultimately be in control of their own destiny. In fact, the number of self-employed women in the UK has recently hit an all-time high of 1.7 million.

But according to the latest Scottish Widows Women and Retirement Report, women going down the self-employment route are failing to properly plan and save for retirement. The report found that 35 per cent – or around 600,000 women – have no pension savings at all. Furthermore, of those that do have pension provisions in place, 46 per cent are saving at the minimum recommended level, therefore risking failing to meet their expenditure requirements during retirement.

With these figures in mind, we look at 3 areas that women who are self-employed, or operate their own micro businesses, should consider in relation to their financial planning.


Since the roll-out of auto-enrolment, employed women earning beyond the minimum threshold must be auto-enrolled into a company pension scheme and pay over the minimum level of contribution from their regular pay. Auto enrolment also made it a mandatory requirement for employers to pay into the pensions of all employees enrolled into the workplace scheme.

Unfortunately, self-employed women miss out when it comes to these pension contributions, which start at the minimum level of 3% of salary (2019/20).

Without access to either the mechanism to save into a pension or the added benefit of employer contributions, for self-employed women, the ball is very much in your court. It can therefore be all too easy to neglect this important area of financial planning.

One way to approach pension savings is to treat a pension as a business expense, setting aside an amount on a monthly basis or having a regular direct debit instruction directly into your pension fund.

It is in the interests of the government to encourage pension savings so tax benefits are also available to those that are self-employed. The way this works differs depending on whether the individual operates as a sole trader, or else as an employed individual within their own limited company.

Sole traders can make individual contributions for themselves and are able to reclaim the tax back in their annual tax return. If your business is incorporated as a limited company, you have the ability to make employer pension contributions from pre-taxed company profits into a pension up to the annual allowance. These payments are treated as an allowable business expense and can be offset against the company’s corporation tax bill.

Cash flow

Unfortunately, the nature of self-employment often means that earnings aren’t predictable –with variable monthly income often dictating the amount that can be extracted as earnings. One way in which self-employed women can save whilst continuing to retain access to their money in case of emergency is to pay a regular amount into a cash or stocks and shares ISA. The latter offers the greater potential for investment returns, but carries a degree of risk of getting back less than you put in should you need to access it at any given time. A cash ISA offers greater flexibility for dipping in and out of should you need to, and once in the ISA environment, could always be converted to a stocks and shares ISA at a later date. The main point is that undertaking the discipline of regular saving allows you to begin to build up a pot of money, providing flexibility and options should you want to contribute to a pension at a later stage when your finances allow.

Insurance arrangements

Although working for a large organisation has its downsides, one of the benefits is the level of protection employees are afforded in the event of illness or death. At the discretion of the employer, employees may receive their normal pay should they be off ill. Other employers may have different arrangements, with the very least option being statutory sick pay.

Alarmingly, it is reported that 93% per cent of the UK’s 4.8 million self-employed workers have no critical illness cover to protect their income if they have long-term sickness absence.

There are a number of options available, including income protection and critical illness cover. although insuring full annual income can be an expensive exercise, some protection is better than none – especially considering the rather gloomy statistics surrounding cancer and other prominent diseases. It’s important to point out here that obtaining cover is cheaper and easier whilst in good health.

Self-employed individuals should also consider life insurance – at least up to the level that might be covered by a large organisation’s ‘death in service’ policy (usually 2 – 3 times annual salary).


The above points should hopefully provide some inspiration on how self-employed women should better protect what they have and plan for their future. Putting insurance policies in place and setting up pension plans might seem like a burdensome process, but once it’s done, the stepping stones are at least in place to build upon. This itself can provide an enormous amount of peace of mind, leaving you free to work on and build your business.