Self employed pension options: what to do with £50,000

If you are self employed, knowing where to start with pensions and investments can feel overwhelming. Understanding your self employed pension options is the best place to begin.

To bring the subject to life, we have used a real world case study generated by our call centre agents at Regulated Advice.

Aged 33, has £50,000 in liquid and accessible savings, and would like to know what investment options are available to him including pensions. He is also looking to start a personal pension and pay £250 per month. He is self employed, earning £50,000 to £60,000 per year and has no pension plans in place.

Breaking down the case study

Our case study is in a stronger position than he probably realises. He has a good income, a healthy savings buffer, and crucially, time on his side.

So let us look at what he actually has to work with and where the opportunities are. First, the £50,000 in savings gives him an immediate lump sum to invest.

Second, his earnings place him in the higher rate tax bracket, which makes pension contributions particularly attractive. Third, at 33, compound growth has decades to do its job. In short, he has the ingredients for a solid financial future.

He just needs a plan.

Understanding self employed pension options for retirement planning

Not every self employed person wants to manage their own investments, and that is completely fine. There are two pension routes worth knowing about.

A self invested personal pension (SIPP) puts you in the driving seat, letting you pick and manage your own investments. Alternatively, a personal pension run by a financial advisor takes that responsibility off your plate entirely.

Our case study has nothing in place yet, so either route gives him a solid starting point. At £250 per month, the contributions are manageable too.

Better still, as a higher rate taxpayer, pension tax relief means that £250 only actually costs him around £150 out of pocket. The government covers the rest.

That is a pretty good deal by any measure.

What to do with £50,000 under self employed pension options

For anyone weighing up self employed pension options, the question of what to do with existing savings is just as important. The £50,000 sitting in accessible savings is a great position to be in.

However, cash rarely keeps pace with inflation over the long term. Therefore, spreading that money across different investment vehicles makes a lot of sense.

A stocks and shares ISA allows up to £20,000 per tax year to be invested free of capital gains and income tax.

A general investment account can hold additional funds beyond the ISA allowance. Together, these options provide a tax efficient and flexible investment strategy.

Projected pension growth (£250 per month from age 33)

The table below shows projected pension pot values based on £250 per month contributions, starting at age 33.

Age	Years invested	Projected pot (5%)	Projected pot (7%)
40	7	£25,600	£29,400
45	12	£47,800	£57,500
50	17	£75,500	£96,300
55	22	£111,200	£151,500
60	27	£157,500	£231,500
67	34	£238,000	£375,000

As a result, even modest monthly contributions can produce a meaningful pot by retirement age.

Projected investment growth on the £50,000 lump sum

The table below shows how a £50,000 lump sum investment could grow over time.

Age	Years invested	Projected value (5%)	Projected value (7%)
40	7	£70,400	£80,300
45	12	£89,800	£112,600
50	17	£114,600	£157,900
55	22	£146,200	£221,400
60	27	£186,500	£310,600
67	34	£255,600	£466,100

The projections above illustrate the power of compound growth. Starting early makes a considerable difference to the final outcome.

Combining pension and investments: the bigger picture

Add both pots together and the numbers start to look really quite serious. For those still weighing up self employed pension options, these figures show just how much is at stake.

At 5% growth, our case study could be sitting on around £494,000 by age 67. Push that growth rate to 7% and the figure climbs to £841,000.

And that is before any increases to contributions are factored in. As earnings grow over the years, so too could the monthly pension payments, which would push both figures higher still.

Self employed pension options: what type of investments to consider

With £50,000 to invest, putting everything in one place is rarely a good idea. Spreading across global equity funds, bonds, and property investment trusts gives a much more balanced exposure.

At 33, there is plenty of time to ride out market ups and downs, so taking on a bit more risk early on makes sense. Then, as retirement gets closer, gradually shifting to steadier and lower risk assets is a sensible move.

Many people refer to this as lifestyling.

Getting the right advice

Self employed pension options are not one size fits all. Consequently, working with a qualified financial advisor is the most reliable way to build a strategy that fits your specific circumstances.

A good advisor will look at your tax position, your goals, and your appetite for risk before making any recommendations. The combination of a SIPP or a personally managed pension, an ISA, and a general investment account provides a solid and tax efficient framework to build from.

The key message here is simple. Starting at 33, with a clear plan and regulated advice, puts anyone in an excellent position for the future. The best time to start was yesterday.

The second best time is today.