More than three-quarters of people stop saving into a pension when they make the move from being employed to being self-employed, with younger people and those on lower incomes most likely to stop saving, analysis from the Institute of Fiscal Studies (IFS) has revealed.

The IFS research showed that only one-in-five self-employed workers contribute to a private pension, compared with around four-in-five employees.

The vast majority of younger workers do not have retirement savings set up; only 13 per cent of self-employed workers aged 30 or under save in a pension.

This compares with around 26 per cent of workers aged 31 or over.

Those in the top third of the earnings distribution as an employee are more than twice as likely to continue saving when self-employed than workers in the bottom third of the distribution.

In the first year after becoming self-employed, almost half of partners save in a private pension, compared with less than 20 per cent of sole traders.

The IFS called for policies to be implemented which would make pension saving easier for the self-employed, for example integrating pension saving into either tax returns or business software, or continued access to workplace savings schemes.

IFS senior research economist, Laurence O’Brien, 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.”

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