Self-employed pensions are designed for individuals who work for themselves. As a self-employed individual, it is essential for you to think about retirement and plan for the future.
Because you’re not an employee, you can’t benefit from an occupational pension.
When you setup a pension you can reduce your income tax at the higher rate, grow your fund tax free and usually take a 25% tax free lump sum on retirement.
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As a self-employed individual, it is essential for you to think about retirement and plan for the future. Because you’re not an employee, you can’t benefit from an occupational pension.
State Pension & Self Employment
If you are self-employed, understanding how the state pension works and your entitlements is crucial for your retirement planning.
In Ireland, when you’re self-employed you should make sure you are paying Class S PRSI at 4% of annual income to ensure you are making PRSI contributions to access the state pension at 66 years old.
Gaps in your PRSI record may effect the amount of a state pension you qualify for so make sure you check.
As of 2025 the current full contributory pension rate is €289.50 or €15,343 per year. Assuming you take state pension at 66 years old and live to 82 years old this is equal to €245,488 of income.
Sole Trader Pension
If you’re a sole trader, you may feel like you’re not suitable for a pension because your income varies and can go up or down every month. Or you may rely on your business to sustain your needs at retirement.
Indeed, many self-employed people plan to continue working into their late 60s and 70s and plan to supplement the State Pension this way.
But think about it, if you work for yourself, you most definitely work hard and maybe harder than the average person.
So, scaling back your work in your 60s and 70s would be a fantastic idea. And the best solution is to invest in a private pension every month, and then use this money to replace your income once you retire.
Self Employed Pension Example
- Brian is 25 years old.
- Plans to retire at 67.
- Brian earns €31,000 per year.
- He puts 15% of his salary in his pension each year.
- Over 40 years, Brian invests €186,000 in his pension.
In a medium-risk pension fund, his fund could build to €458,731 but could be as low as €171,550.
Brian has a 92% likelihood of getting back more than he invested.
Brian may wish to move to lower-risk investments as he approaches retirement.
- Income tax relief each year, because of your contributions.
- The State Pension may be a much lower income than you’re used to.
- Unexpected ill-health might affect your ability to keep working in your 60s & 70s.
- Taking a tax-free lump sum from your pension can allow you to pay off last-minute debts or mortgages if you plan to scale back your work & reduce your income.
It’s never too late to start building your pension fund. It’s one of the best ways to save money and potentially let your money grow over time. If you need more reasons to start a pension, look here.
Pensions for self-employed people:
- Retirement Annuity Contracts – RACs, which are also known as Personal Pension Plans, etc.
- Personal Retirement Savings Accounts – PRSAs
These two types of pensions will allow you to get income tax relief on your pension contributions. Moreover, you will have the same choices of what to do with your fund once you retire.
You should also know that those self-employed pension options will give you more freedom with what to do with your money than other types of pension plans.
Need Self Employed Pension Help?
If you need any help understanding your self employed pension contact us. We offer a no obligation initial call.
Where to start?
Speak to Greenway Financial Advisors, call us now on 01 853 2727 to talk directly with us.
We can help find the best pension option, within your budget. Plus, as experts in the field, we will advise you on a suitable product that will help you grow your fund. Get a free 15 consultation with a financial advisor here.
Best of all, we work with you long-term:
- Your business will grow and change – we can help you decide when to increase your yearly contribution.
- We’ll help you to monitor your pension over time, and switch funds if you need to.
- We’re also able to remind you when your Tax Relief percentage increases as you get older, to maximize your relief.
FAQ
What pension options are available for self-employed individuals
Standard Personal Retirement Savings Accounts (PRSAs): Flexible pensions with regulated charges, allowing contributions to start and stop at any time. There is also a wide range of funds available but choice of high risk investments will be lower.
Non-Standard Personal Retirement Savings Accounts (PRSAs): Flexible pensions but potentially higher charges. Offers good flexibility and higher risk funds.
Personal Pension Plans (PPPs): Suitable for consistent contributions, offering a wide range of investment options.
How much can I contribute to my pension, and what tax relief is available?
Contribution limits are age-related, allowing a percentage of net relevant earnings to be contributed annually with tax relief:
- Under 30 years: Up to 15% of earnings.
- 30-39 years: Up to 20%.
- 40-49 years: Up to 25%.
- 50-54 years: Up to 30%.
- 55-59 years: Up to 35%.
- 60 years and over: Up to 40%.
Tax relief is granted at the individual’s marginal tax rate, potentially reducing taxable income by 20% or 40%, depending on income levels.
Example: 45 year old earning €60,000 per year can contribute up to €15,000 per a year to their pension and recieve tax relief. In this example a €15,000 contirbution would only cost €9,000 after tax reliefs.
When can I access my pension funds?
Typically, pension benefits can be accessed from age 60. Upon retirement, individuals can take a tax-free lump sum (usually up to 25% of the fund), with the remaining balance used to purchase an annuity or invest in an Approved Retirement Fund (ARF).
What happens to my pension if I die before retirement?
In the event of death before retirement, the full value of the pension fund is paid to the individual’s estate, usually without tax liability. However, inheritance tax may apply. For spouses/civil partners there is no tax liability.
Read more about this here: what happens to your pension when you die.
Are there any charges associated with pension plans?
Yes, pension plans may have charges, including:
- Annual Management Charges (AMC): For Standard PRSAs, the maximum AMC is 1%.
- Contribution Charges: Standard PRSAs may have a maximum charge of 5% on each contribution.
- Allocation Rate: This is important to know how much of your contribution is been added to your funds. Some providers offer bonus allocation.
- Commissions: Your pension advisor/broker may be getting a commission to arrange products on your behalf. May sure you know these charges.
It’s important to review the specific charges of each pension product, as they can vary.
How do I set up a pension plan as a self-employed individual?
Setting up a pension involves:
- Consulting a Financial Advisor: Seek professional advice to plan your retirement income needs.
- Selecting a Pension Provider & Fund Choices: Choose a reputable provider offering the desired pension plan.
- Regular Contributions: Establish a consistent contribution schedule, adjusting as financial circumstances change.
- Monitor Regularly: Adjust investments as needed to manage pension fund. Your financial advisor should help you with this.
- Warning: Past performance is not a reliable guide to future performance.
- Warning: This product may be affected by changes in currency exchange rates.
- Warning: The value of your investment may go down as well as up.
- Warning: If you invest in this product you may lose some or all of the money you invest.
The information provided is for general purposes only and does not constitute financial advice.
Always consult a qualified financial advisor who is registered with the Central Bank of Ireland for personalised guidance.
