IFS - Pension saving plummets when employees move into self-employment

11 Jun 2026 12:44 PM

More than three-quarters of employees who consistently saved into a pension stop doing so when they move into self-employment.

Currently, only around one-in-five self-employed workers save into a private pension, compared with around four-in-five employees. There is widespread agreement that there is an urgent need for policies addressing low pension participation among the self-employed, as recently highlighted by the Second Pensions Commission.

A key potential moment for such policies is the point when employees move into self-employment. Currently, even among employees consistently saving in a pension, more than three-quarters stop saving in a pension once they start being self-employed.

This is a key finding of new research published by the Institute for Fiscal Studies, funded by Administrative Data Research UK. It examines how private pension saving changes for employees who were consistently saving in a workplace pension before moving into self-employment. The analysis uses newly linked administrative data and allows us to draw important lessons for policy.

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% of workers aged 30 or under save in a pension, compared with around 26% 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% of sole traders. Similarly, workers in the top third of the earnings distribution as an employee are over twice as likely to continue saving when self-employed as workers in the bottom third of the distribution.
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. 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. One moment to target is the point when workers move from an employee job into self-employment, where currently over three-quarters of workers stop saving. Ideally, policies could make it easier for these workers to continue saving in the workplace pension pot they had with their previous employer. For example, employers or pension providers could potentially be required to provide more details on how to continue saving in the same pension pot when employees leave their job.’