Half (49%) of self-employed workers with a private pension change their pension saving habits once they start working for themselves, according to research from Standard Life.
While a fifth (18%) of people use going solo as an opportunity to increase how much they save, a third (33%) reduce, pause or stop their pension contributions altogether.
Standard Life said those who pause contributions following self-employment do so for an average of two years, while 15% extend this break to over five years.
The impact of becoming self-employed varies significantly across generations, however younger workers are far more likely to adjust their pension saving behaviour. Gen Z (56%) and millennials (52%) are significantly more likely than Gen X (29%) and Baby Boomers (16%) to say they have reduced, paused or stopped pension contributions after going self-employed.
A similar pattern emerges across those increasing contributions. Almost two fifths of Gen Z (37%) and a quarter (25%) of millennials say they have increased how much they save into their pensions, compared with one in 10 Gen X (11%) and Baby Boomers (11%).
Mike Ambery, retirement savings director at Standard Life, said: “Life rarely follows a straight line and pensions don’t either. Becoming self‑employed is a major life moment that often reshapes how people think about their finances, with contributions rising, falling or pausing as income becomes less predictable and the structure of a workplace pension falls away.
“For many younger workers, this shift happens earlier in their careers, at a point when saving habits are still being established. That can make this a more fluid period, where pension contributions move in both directions. Positively, for some it can also be a trigger to take greater control and even increase what they put into their pension. Whatever the approach, the key is staying engaged and making conscious decisions about long‑term saving.”
Standard Life warned that any adjustments to pension saving have the potential to significantly shape retirement outcomes over time. According to its calculations, someone starting work at age 22 on a salary of £25,000 and contributing at minimum auto-enrolment levels could build a retirement pot of around £210,000 by age 68. However, someone who pauses contributions between 30 and 35 due to self-employment could see their final pot reduced by £25,000.
The impact is even greater for someone who chooses to take a longer break. Someone who pauses for 10 years due to self-employment between the ages of 30 and 40 could see their final pot reduced to £161,000 – £49,000 less than if they had not paused.
By contrast, those who choose to increase pension contributions following self-employment could see their retirement savings benefit significantly. Boosting contributions by an additional £250 a month over five years between 30 and 35 could increase a pension pot by around £26,000 to £236,000, while continuing this higher level of saving over 10 years could grow savings by approximately £48,000 (£258,000).
Ambery added: “In the absence of a structured workplace pension, many people who move into self‑employment have historically turned to products like Lifetime ISAs to support their retirement goals. However, with the Government signalling plans to phase out their use for retirement saving, some may be left facing a gap in their long‑term plans. This makes it even more important to consider how pensions can provide a more stable, tax‑efficient foundation for the future when making the transition to self‑employment.
“By taking a proactive approach early on – whether that’s setting up or reviewing a pension, maintaining contributions where possible, making the most of available tax reliefs, or keeping track of existing pots – self‑employed workers can stay in control and keep their retirement plans on track as their working lives change.”
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