Pension saving declines among self-employed

The proportion of self-employed people saving into a personal pension scheme has fallen by almost two thirds over the past decade, according to research by the Resolution Foundation.

The report identifies a steep decline in retirement saving among the self-employed. The number contributing to a pension fell from 1.1 million in 2001/02 to 0.5 million in 2012/13 despite the self-employed workforce growing by 900,000 over the same period.  In proportion, this is a 65% fall over 11 years.

In 2012/13:

  • 27% of self-employed workers were contributing to a personal pension, compared to 51% of employees
  • 19% of self-employed women were contributing to a pension.

The research finds that self-employed workers are more likely to rely on non-pension income (such as ISAs) in retirement than employees. Low earnings and a lack of spare capital are the main obstacles to saving into a pension for self-employed people.

  Can't afford to save into a pension
Self-employed without employees 41%
Self-employed with workers 28%
Employees 33%

Conor D’Arcy, policy analyst at the Resolution Foundation, said:

"While some self-employed workers will have other forms of income to rely upon, pensions are still the main way to boost living standards in retirement and more needs to be done to encourage this kind of saving.

"Changing the way employees prepare for their retirement has been a huge public policy success. But there is risk that Britain’s 4.5million self-employed have fallen through the cracks. Ensuring that they save enough for their retirement should be a top priority for the new government."