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Posted: Thu 24th Sep 2026
9 min read
Reviewed by Amanda Peters, content manager
Ask a room of business owners how they’re planning for retirement, and a fair few will give you the same answer: the business is the pension.
It sounds reasonable enough. It’s also a plan that puts an enormous amount of weight on a single event you don’t entirely control, at a moment you probably won’t get to choose.
That’s not to say the value you’re building doesn’t count. It plainly does, but here we review the case for having something else growing alongside it.
For most people running their own business, spare money goes back in. Profit pays for stock, a new hire, better equipment, or simply keeps working capital healthy enough that you’re not checking the bank balance every Friday afternoon.
Set against locking money away until at least 57, reinvesting feels like the better return and the one you have some influence over.
There’s no nudge to guide you either. Employees are enrolled into a workplace pension automatically and have to opt out on purpose.
Nobody does that for you when you’re the person running the payroll. The gap it has created is wide. Research published by the Social Market Foundation in August 2025 found that roughly 20% of self-employed workers pay into a pension, compared with 78% of employees.
So if pension planning has sat on your list for a few years without moving, you’re in good company. The difficulty is that the default alternative, selling the business and living off the proceeds, carries more risk than it tends to feel like.
You might have 2033 pencilled in. Whether 2033 turns out to be a good year to sell a business in your sector is a different question entirely, and the answer depends on interest rates, buyer appetite and a dozen other things happening well outside your office.
Owners who had 2020 in mind found that out the hard way.
If the client relationships, the pricing judgement and the supplier goodwill all live in your head, a buyer isn’t purchasing a company. They’re purchasing a job, and they’ll price it accordingly.
Reducing that dependence is entirely doable, but it takes years rather than months, which is why it pays to start planning your exit long before you actually want to leave.
One business, one sector, one customer base. Anyone looking at that on paper would call it concentration risk, and if a friend told you their entire retirement rested on a single holding, you’d probably say something.
Even a strong sale hands you a taxable pot of money rather than a monthly wage. To picture what that has to stretch to, the Retirement Living Standards put a comfortable retirement at £45,400 a year for a one-person household, and £62,700 for two, and those figures assume you own your home outright.
Turning a one-off payment into three decades of that is a piece of work in itself.
Here’s where it gets less obvious than it is for an employee. Run a limited company, and you’re choosing between salary, dividends and employer pension contributions, each of which interacts differently with corporation tax and National Insurance.
Employer contributions come out of company profits and don’t attract National Insurance, which shifts the maths in a way that isn’t visible from the outside.
That’s the point at which independent pensions advice starts to earn its keep, because the right answer genuinely differs from one business to the next and getting it wrong is expensive in a quiet, hard-to-notice way.
A first conversation tends to cover ground that’s awkward to cover alone: what your existing pensions are actually worth once charges are stripped out, whether old workplace schemes from a previous job are worth consolidating, and whether contributions are better made by the company or by you personally.
It’s worth knowing there’s a ceiling on all this. For 2026-27 the annual allowance is £60,000, or 100% of your earnings if that figure is lower, and contributions above it lose their tax relief.
Plenty of owners never come close. Some, after a particularly strong year or the sale of an asset, could, and it’s the sort of thing far better checked in advance than discovered afterwards.
Unused allowance from earlier years can sometimes be carried forward too, which occasionally matters a great deal if your income arrives in uneven chunks.
None of that helps if you don’t feel you have anything spare, which is the usual sticking point. A few things make it easier.
Treat contributions as a fixed monthly cost rather than something you look at in March. A modest amount leaving the account every month, sitting alongside rent and software subscriptions, is far more likely to survive a busy quarter than a lump sum you have to consciously decide on once a year.
Make the good months work for you. If your income is seasonal or lumpy, a flexible arrangement that lets you top up after a strong quarter suits business owners better than a rigid figure set in January and never revisited.
Be honest about which cash the business genuinely needs. Money held back as a real buffer is doing a job.
Money sitting in a current account because nobody has decided what to do with it is losing value to inflation every month it stays there.
Forward plan and put a date in the diary to look at your position again. Contributions set when the business was turning over £80,000 rarely still make sense at £300,000, and the review is the bit almost everybody skips.
Once a year, ideally somewhere near your year-end, is enough to keep the figure honest.
Selling the business is a perfectly sound part of a retirement plan. The problem comes when it’s the entire plan, because that hands the outcome to a buyer, a market and a set of conditions you won’t control on the day.
Something separate, growing quietly in the background, changes the position considerably.
It means a disappointing offer is disappointing rather than disastrous. It means you can walk away from a bad opportunity, which tends to improve the deals you’re offered.
It also means you can pick your moment instead of having it picked for you by a health scare or a change at home, and if the sale does go well, you’ve simply got more.
Small and consistent, started sooner, beats large and late. That holds for most people, and it holds especially when the rest of your wealth is tied up in something you can’t sell in an afternoon.
