By Clare Yates
5 min read
The latest findings from the Institute for Fiscal Studies (IFS) show that more than three-quarters of employees who regularly save into a pension stop contributing when they move into self-employment.
Meanwhile, the Pensions Commission is warning that millions of people are undersaving for retirement. The figures raise important questions about whether enough self-employed workers are preparing for later life.
At a glance
More than three-quarters of employees who regularly save into a pension stop contributing when they move into self-employment.
Only around one in five self-employed workers currently save into a private pension, compared with around four in five employees.
Just 13% of workers aged 30 or under continue saving into a pension in the first year after becoming self-employed. This rises to 26% for workers aged 31 or older.
Around 15 million people are currently undersaving for retirement, according to the Pensions Commission.
Without action, the number of people undersaving for retirement could rise to 19 million.
Self-employed workers have been identified as one of the groups most at risk of inadequate retirement savings.
Pension saving drops sharply after becoming self-employed
The UK's self-employed workforce could be facing a retirement savings challenge, according to recent findings from the Institute for Fiscal Studies (IFS). While automatic enrolment has transformed pension saving among employees over the past decade, many self-employed workers appear to be falling behind.
The research, published this month, follows warnings from the Government-backed Pensions Commission in May that millions of people are not saving enough for retirement, with self-employed workers identified as one of the groups most at risk.
The IFS found that more than three-quarters of employees who regularly paid into a pension stop doing so when they move into self-employment.
The report also found that only around one-in-five self-employed workers currently save into a private pension, compared with around four-in-five employees.
According to the researchers, the transition from employment to self-employment appears to be a key point where pension saving habits are lost.
‘An urgent challenge’
Laurence O'Brien, Senior Research Economist at the IFS and one of the report's authors, 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.”
He added: “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.”
Why are the self-employed saving less?
One obvious difference is that employees are automatically enrolled into workplace pensions, with contributions taken directly from their salary and topped up by their employer.
Self-employed workers do not benefit from automatic enrolment or employer contributions. Instead, they need to actively set up and maintain their own pension arrangements, often while balancing the financial demands of running a business.
The IFS suggests that making pension saving easier for the self-employed could help address the problem. Potential solutions include integrating pension contributions into tax returns or business software, making saving feel less like an extra administrative task.
Younger workers are particularly vulnerable
The research found younger self-employed workers are especially likely to stop saving.
In the first year after moving into self-employment, only 13% of workers aged 30 or under continued paying into a pension, compared with around 26% of workers aged 31 and over.
The report also found that workers with higher previous earnings and those operating as business partners were more likely to continue pension saving than sole traders.
The warning signs are growing
The IFS findings are not the only recent warning about retirement saving in the UK.
In May 2026, the Pensions Commission published an interim report highlighting concerns that around 15 million people are currently undersaving for retirement. Without action, it warned this figure could rise to 19 million.
The report identified self-employed workers as one of the groups facing the greatest challenges, alongside low and middle earners and women.
What does this mean for self-employed workers?
The findings highlight the importance of thinking about retirement planning as soon as possible after moving into self-employment.
One of the biggest advantages employees have is consistency. Pension contributions happen automatically every month, helping savings build up over time without much effort.
For self-employed workers, pension saving often becomes another item on an already long to-do list. However, setting up and regularly contributing to a personal pension or SIPP can help recreate the same disciplined approach to long-term saving.
With policymakers increasingly concerned about retirement readiness, the latest research serves as a reminder that while self-employment offers flexibility and independence, it also places more responsibility on individuals to prepare for their financial future.
Sources
More than three-quarters of employees who regularly save into a pension stop contributing when they move into self-employment: Institute for Fiscal Studies. "Pension saving plummets when employees move into self-employment" (June 2026). Accessed 14 June 2026.
Around 15 million people are currently undersaving for retirement: Department for Work and Pensions. Pensions Commission interim report press release (May 2026). Accessed 14 June 2026.
