The state pension doesn’t amount to much these days. The guaranteed minimum is just £114 a week - that’s less than six grand a year. If you do not want to be living on that income, then you’re going to need to save now to pay for your retirement.

Having your own personal pension plan, separate from the state scheme, is the commonest and most tax efficient way of saving for a wealthier retirement. There are significant tax breaks available to encourage saving.

You are allowed to invest up to 100 percent of your earned income each tax year, subject to an annual limit of £215,000 (for tax year 2006/07). There is also a lifetime limit of £1.5m.

You can also invest up to £3,600 even if you have no taxable earned income in the year - and that limit applies to any non-working spouse or partner, children and even grandchildren. They’ll benefit from the basic rate tax break - though you will not.

You pay your contribution after deducting basic rate 22 percent tax, and the government makes up the rest. For instance, to contribute £100 you only pay £78. If you are a higher rate tax payer you get a further break, but you will have to claim it back via self-assessment.

This money is invested until you retire, when you take 25 percent of the total fund as a tax free lump sum, and use the rest to buy an annuity which gives you an income. Unlike the old style company pension, you do not get a defined pension rate at the end - what you get depends on the performance of your investments.

There is quite a choice of schemes on the market. Stakeholder pensions can be particularly efficient for self-employed people, since the amount they can charge is tightly regulated. For instance they are not allowed to charge more than 1.5 percent of the fund’s value per year, and that falls to one percent after ten years in the scheme. More to the point, they’re not allowed to charge penalties if you stop paying into the scheme, or change the amount of contributions. This is useful if you want to take a career break, or if your earnings fluctuate.

Most stakeholder pensions offer a limited choice of funds, but if you want to control your investments more directly you might consider a SIPP through which you can invest in funds and shares. Using a SIPP you can also borrow up to 50 percent of the fund’s value.

A particularly attractive aspect of SIPPs for self employed people is that you can buy commercial property through a SIPP. You have to do it on an arm’s length basis - that is, paying rent to your pension fund - but if you need to invest in your own premises, you can do so through your pension fund.

By the way, you do not have to restrict yourself to one fund - you can now take out as many schemes as you like, so you can diversify.

The earlier you start saving, the longer your money has to increase in value. If you start saving in your twenties, advisers suggest, you should be putting away 10 percent of your earnings every year. Wait till you are 40, and you’ll need to save a fifth of your earnings to get the same pension. There are quite a few pensions calculators on the internet that can help you work out what to save.

But is it really worth saving in a pension? Despite the tax advantages of pensions saving, you might decide that other forms of investment are more suitable. You cannot leave pensions savings to your family, and of course the government might increase the retirement age again.

Investing in a maxi ISA could help you here. The limit on annual investment into an ISA was increased from £7,000 to £7,200 in the last budget. Though there is no tax relief on investment into an ISA, investments are free from capital gains tax and income tax on dividends - so your savings will grow without being taxed.

The drawback to using ISAs as a means of retirement saving is that it is easy to withdraw the money. Though that might be useful if you need to invest in your business, it can be disastrous if you are vulnerable to the temptation of paying for a plush holiday out of your ISA funds. And once money has been taken out of an ISA, you cannot put it back in again - so you lose the tax break.

Some people have decided to use buy-to-let residential property as a means of providing for their retirement. There are some arguments for this. You get rental income now, and if the property increases in price, you can sell it for a profit later on. But it is not very tax efficient - you’ll pay income tax on the rent, and capital gains tax on the profit of any sale. Besides, the size of investment means you’ll probably be putting all your eggs in one basket, which is risky, and you might not be able to sell easily when you come to retire.

Whatever means you decide to use, it’s important that you save for your retirement. You’ve already decided, by being self-employed, to look after your own future - make sure it is a good one.