Most employees stop pension saving when moving to self-employment, analysis finds

More than three-quarters of employees who consistently saved into a pension stopped doing so when they moved into self-employment, according to new research from the Institute for Fiscal Studies (IFS). 

Only around one in five self-employed workers saved into a private pension, compared with four in five employees.

The research found younger workers who moved into self-employment were much less likely to keep saving in a private pension than older workers. 

In the first year after moving, just 13% of workers aged 30 or under saved in a pension compared to 26% of workers aged 31 or over.

Workers who had higher earnings as an employee, or who became a partner rather than a sole trader, were more likely to continue saving in a private pension when self-employed. 

In the first year after becoming self-employed, almost half of partners saved in a private pension, compared to less than 20% of sole traders.

Policy suggestions included integrating pension saving into tax returns or business software and making it easier for workers to continue saving in their previous workplace pension pot.

Laurence O’Brien, senior research economist at the IFS, said: “Boosting private pension saving among the self-employed is becoming an urgent challenge for policymakers.