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Half of self-employed workers change pension saving habits after leaving PAYE, data finds

Data showed that a fifth of self-employed workers increased their pension contributions, but a third reduced, paused or stopped payments. 

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Half of self-employed workers change pension saving habits after leaving PAYE, data finds
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Standard Life has reported that half of self-employed workers with a private pension changed how they save for retirement after leaving PAYE jobs. 

The figures come as the Pensions Commission warned just 4% of people who are wholly self-employed are saving into a pension.

Data showed that a fifth of self-employed workers increased their pension contributions, but a third reduced, paused or stopped payments. 

Those who paused contributions did so for an average of two years, with 15% taking a break for more than five years. 

Just over half of Gen Z and Millennials reduced, paused or stopped their contributions after becoming self-employed, compared to 29% of Gen X and 16% of Baby Boomers. 

37% of Gen Z and 25% of Millennials said they had increased their pension savings after going solo, compared to 11% of Gen X and Baby Boomers.

Mike Ambery, retirement savings director at Standard Life, said: “Life rarely follows a straight line – and pensions don’t either. 

“Becoming self employed is a major life moment that often reshapes how people think about their finances, with contributions rising, falling or pausing as income becomes less predictable and the structure of a workplace pension falls away. 

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“The Pensions Commission’s interim report brings this challenge into sharp focus.”

Ambery added: “For many younger workers, this shift happens earlier in their careers, at a point when saving habits are still being established. 

“That can make this a more fluid period, where pension contributions move in both directions. 

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“Positively, for some it can also be a trigger to take greater control and even increase what they put into their pension.”

He said: “Whatever the approach, the key is staying engaged and making conscious decisions about long term saving.

“In the absence of a structured workplace pension, many people who move into self employment have historically turned to products like Lifetime ISAs to support their retirement goals. 

“However, with the Government signalling plans to phase out their use for retirement saving, some may be left facing a gap in their long term plans.”

He added: “This makes it even more important to consider how pensions can provide a more stable, tax efficient foundation for the future when making the transition to self employment.

“By taking a proactive approach early on – whether that’s setting up or reviewing a pension, maintaining contributions where possible, making the most of available tax reliefs, or keeping track of existing pots – self employed workers can stay in control and keep their retirement plans on track as their working lives change.”

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