Proportion of self-employed private pension savers down 32pp in 20 years

The proportion of self-employed people saving into private pensions has fallen from 48 per cent to 16 per cent over the last two decades, according to a report from the Institute for Fiscal Studies (IFS).

The report found that drop in participation seen between 1998 and 2018 was driven by groups such as the self-employed who were earning over £500 per week, with the proportion of this cohort saving into a private pension dropping from 70 per cent to under a quarter (24 per cent).

Additionally, over 60 per cent of those who had been self-employed for more than seven years were saving in a pension until 1998-99, while this figure had dropped to 23 per cent by 2018-19.

IFS research economist, Heidi Karjalainen, said: “Private pension saving has fallen dramatically among the self-employed over the last two decades. This fall is not driven by the changing make-up of the self-employed workforce.”

The report found that over the past two decades the self-employed workforce has become slightly older, less male dominated, and less dominated by full-time workers, while the financial crisis has dramatically reduced average earnings among the self-employed, which are still in 2018-19 lagging behind their 1997-98 levels.

Even so, the falls in pension participation after taking into account the role of these changes drove the overall decline in pension saving.

Karjalainen continued: “Particularly concerning are the huge declines in participation among the more long-term and more well off self-employed: these are groups who will particularly need to save privately for retirement on top of the state pension to avoid falls in their standard of living when they stop work.”

The report added that it does not appear that self-employed workers were using other financial assets as a substitute for pension saving, as the proportion of individuals saving in either a pension, savings account, ISA or shares declined over the last 20 years, and more rapidly for the self-employed than for employees.

Karjalainen concluded: “Given that other financial assets do not seem to be acting as a substitute for pension saving, policymakers are right to be concerned about these trends and to be considering how to make it easier – and to encourage – the self-employed to save more.”

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