Work and Pay

The self-employed pension savings gap

Commissioned by: Citizens Advice

  • Published 9th Feb 2016
  • Authors: Ceri Hughes, , Tom MacInnes,
  • Category: Work and Pay

This paper explores current pension contribution levels amongst the self-employed. It provides an overview of the number of self-employed people paying into a pension and how this varies over time, and across different groups of the population. We also explore the finding that pension contribution levels are very low amongst self-employed adults, considering whether this is linked to lower income levels, and whether the self-employed are making alternative arrangements to provide for themselves in retirement.

We find that there is a clear pension savings gap among the self-employed. The proportion of self-employed adults who are paying in to a pension each year has been declining, falling to just 17 per cent in 2013/14.

Pension participation levels among self-employed people are consistently lower than employees. This is true across different age groups and at different levels of income.

Meanwhile, the pension pots of self-employed households are also worth less than employee pension pots, so self-employed people are less likely to save than employees and tend to save less when they do.

Though some self-employed people could be compensating by investing in property, it is not clear that any accumulated wealth will be sufficient to offer security in retirement, with implications for the future living standards of the self-employed