Self-employed workers saving into a pension rarely change the contribution amounts they make, research from the Insitute for Fiscal Studies (IFS) has revealed, with half (49 per cent) of those saving in two consecutive years are saving the same amount a year later.

The report also found that, among those who are still saving in a pension 9 years later, close to a quarter (23 per cent) saved the same amount in cash terms.

IFS suggested that the findings were “particularly worrying” amid the current high-inflation environment, arguing that current high inflation rates means an even larger fall in the real value of contributions.

The report also found that nearly a quarter of the long-term self-employed workers who are saving in a pension choose the contribution amount as a monthly or annual ‘round number’ in nominal pound terms, whilst the most common single amount among savers was £50 per month, or £600 per year.

Those who save a ‘round number’ amounts, presumably having set up a direct debit for that amount, were also more likely to leave their cash-terms contributions unchanged over many years, with 60 per cent of ‘round number’ savers still saving a decade later.

In addition to this, the IFS found that while self-employed people earning between £10,000 and £20,000 per year have average pension contributions similar to those of employees with defined contribution schemes, for those earning above £20,000 per year, the self-employed who save in a pension contributed substantially less than similarly paid employees.

Commenting on the findings, IFS research economist and author of the report, Heidi Karjalainen, stated: “The very low level of private pension participation among the self-employed has, rightly, led to a huge amount of policy concern from the government.

"But with so many self-employed savers’ pension contributions not rising in line with either inflation or earnings, it is clear that solving the problem of participation alone is not enough to ensure the adequacy of future pension incomes for self-employed workers.”

IFS associate director, Jonathan Cribb, also suggested that a form of auto-escalation could be a good way to boost pension saving by the self-employed.

“For example, using a direct debit that increased in line with inflation, or at another pre-set rate,” he suggested. “This would help to ensure that contributions do not fall in real terms over time.”

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