Self-employment: Pensions are an ‘urgent challenge’
In what has been described as an ‘urgent challenge’, new figures have revealed that 75 per cent of self-employed people are not saving into a pension.
The report also found the majority of people entering self-employment stop saving for their retirement – with younger workers worst affected
Currently, only 25 per cent of self-employed people save into a private pension, compared to four in five employees, according to the research from the Institute for Fiscal Studies (IFS).
It says: “There is widespread agreement that there is an urgent need for policies addressing low pension participation among the self-employed.”
It follows the Second Pensions Commission, briefed by the government in mid-2025 to evaluate the long-term future of pensions, which highlighted the fact that just four per cent of ‘wholly self-employed’ workers are saving for retirement.
Other key findings from the report include:
- Younger workers who move into self-employment are much less likely to continue saving in a private pension than older workers. In the first year after moving into self-employment, only 13 per cent of workers aged 30 or under save in a pension, compared with around 26 per cent of workers aged 31 or over.
- Workers who had higher earnings as an employee, or who become a partner rather than a sole trader, are more likely to continue saving in a private pension when self-employed. In the first year after becoming self-employed, almost half of partners save in a private pension, compared with less than 20 per cent of sole traders.
The economics research institute says the large drop in pension saving when workers move from an employee job to self-employment suggests an opportunity for policies to facilitate pension saving for the self-employed.
It adds: “The lack of automatic enrolment for the self-employed means that it is much more hassle for them to save in a pension than for employees.
“A good starting point for reform would be policies to make pension saving easier for the self-employed, such as integrating pension saving into either tax returns or business software.
“In addition, it could be made easier for self-employed workers to continue saving in the workplace pension pot they had with a previous employer.
Laurence O’Brien, a senior research economist at IFS and one of the authors of the report, said: “Boosting private pension saving among the self-employed is becoming an urgent challenge for policymakers.”
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