to help you make informed decisions about your wealth
Archived article
people in office

Self-employed falling through savings gap

06 October 2014

Research shows many self-employed people aren’t making pension contributions, leaving themselves at considerable risk later in life.

Numbers of self-employed rising

There is a surge in self-employment across the UK. Whether this rise is based on more opportunities for entrepreneurs, or suggestive of jobseeker desperation is arguable. But it’s now estimated that one in seven of the working population make a living by working for themselves1

Only a third of self-employed people make pension contributions, leaving the majority at risk of financial insecurity in later life.

 Research reveals gaps in saving

But research commissioned by The Resolution Foundation has found that only a third of self-employed people make pension contributions, leaving the majority at risk of financial insecurity in later life.

The research, conducted by Ipsos MORI, found that just 34 per cent of self-employed respondents were currently contributing to a personal pension. More concerning is that the figure for self-employed people aged 60 and over was only slightly higher, at 39 per cent.

A different picture emerging for employed individuals
Over half of employees make provision by way of personal or employer contributions, a situation that’s recently been improving due to the gradual introduction of auto-enrolment. But while auto-enrolment ensures workers are automatically placed into a workplace pension scheme by their employer, it doesn’t apply to those working for themselves.

It suggests a gap is widening when it comes to saving for later life, between people who are their own boss and those who are employed.

Building a business can make saving difficult
Saving into a pension can be a more difficult habit to develop if you’re trying to establish your own business; there are no employer contributions and irregular income patterns can make regular saving difficult. Clearly it’s not easy thinking about a pension when you are worried about where income is coming from.

Selling up isn’t always the solution
If you own your business and intend to fund your later years by selling it, you may want to consider the possibilities carefully. Much can depend on the value and liquidity of the assets you are trying to sell at the time of your retirement and in a worst case scenario there’s the risk the business could fail before you reach that milestone. 

Pension contributions remain one of the most secure and tax-efficient ways to save, avoiding both corporation tax and National Insurance, while attracting tax relief.

Tax relief on pension contributions

Pension contributions are topped up by income tax relief from HM Revenue & Customs (HMRC). So, if you’re a basic-rate taxpayer, for every £100 you pay into your pension, HMRC will add an extra £20.

Help for self-employed

An area where the government has taken a positive step to improve things for the self-employed is in its introduction of the Single-Tier State Pension.

From 2016, it will bring the self-employed fully into the State Pension, treating their National Insurance contributions the same as employee contributions for State Pension purposes. 

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

1 Source: Resolution Foundation. "Just a job - or working compromise?" May 2014


We value your opinion

We are always looking for ways to improve our service, so if there is something you think we could do better, or that you think we are doing really well, we would love to hear from you.

The only thing we ask is that you do not include any personal information, like account numbers, in your email. If your matter is urgent, needing our personal attention, please contact your local office.

You may be contacted to follow up on your comments.


If you wish to complain about any aspect of our service, we will do what we can not only to meet, but exceed your expectations of a swift and thorough resolution. More details of our complaints procedure can be found here.