Understanding pension saving among the self-employed

Abstract

The authors would like to thank Rowena Crawford for assistance with the analysis, and Alex Beer, Carl Emmerson and David Sturrock for helpful feedback and comments. The authors would also like to thank Laurence O'Brien for assistance with the Annual Survey of Hours and Earnings (ASHE) data. This report is an output from a programme of research on 'Pension Saving over the Lifecycle' that is funded by the Nuffield Foundation under grant WEL /FR-000000374. Co-funding from the ESRC-funded Centre for the Microeconomic Analysis of Public Policy (ES/T014334/1) is also gratefully acknowledged. This work was produced using statistical data from the ASHE, provided by the Office for National Statistics (ONS). The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work contains statistical data from HM Revenue and Customs (HMRC) which is Crown Copyright. The research data sets used may not exactly reproduce HMRC aggregates. The use of HMRC statistical data in this work does not imply the endorsement of HMRC in relation to the interpretation or analysis of the information.The Nuffield Foundation is an independent charitable trust with a mission to advance social well-being. It funds research that informs social policy, primarily in Education, Welfare, and Justice. It also funds student programmes that provide opportunities for young people to develop skills in quantitative and scientific methods. The Nuffield Foundation is the founder and cofunder of the Nuffield Council on Bioethics, the Ada Lovelace Institute and the Nuffield Family Justice Observatory. The Foundation has funded this project, but the views expressed are those of the authors and not necessarily the Foundation. Visit www.nuffieldfoundation.org.Understanding pension saving among the self-employed

The gender gap in pension saving

“…High levels of pension saving in the public sector, where a higher share of women work, and lower levels of pension saving among the self-employed, where a lower share of women work, tend to work against a gender pension saving gap in favour of men. This means that measures to reverse the decline in pension saving among the self-employed, as suggested by Almond, Phillips and Sandbrook (2022) and Cribb and Karjalainen (2023), would lead the gender gap in pension saving to actually widen (as would reducing pension contribution rates in the public sector). 4 Nevertheless, this does not necessarily imply that these policies are undesirable; indeed, should policymakers wish to reduce the gender gap in pension saving, it would be preferable to use policies that address the fundamental drivers of the difference.…”

“…Figure 13 reproduces a chart from Cribb and Karjalainen (2023). It shows that when comparing pension participation rates of men and women of similar income levels, a more complicated picture reveals itself.…”

“…According to recent UK government statistics, 79% of employees are saving into a pension (Office for National Statistics, 2022), compared with 19% among the self-employed (Department for Work and Pensions, 2022b). While some of these differences in pension participation rates can be explained by differences in earnings (as many self-employed people have very low earnings), Cribb and Karjalainen (2023) compare pension participation rates of employees and the selfemployed, and show that gaps in pension saving between the self-employed and employees exist even after controlling for differences in earnings, and that these gaps have widened as employees have become subject to automatic enrolment.…”

“…In this section, we first examine differences between the employee and self-employed workforces that could be important for the gender pension gap, and then examine the gender pension gap for self-employed workers. We use our own analysis of survey data and cite recent analysis from Karjalainen (2023) and Cribb and Karjalainen (2023), who examine the pension saving decisions of the 'long-term' self-employed who have been self-employed for at least five years using administrative tax records data from HM Revenue and Customs.…”

“…In particular, Karjalainen (2023) and Cribb and Karjalainen (2023) also examine whether selfemployed women are less likely to be saving into a pension after controlling for a number of characteristics, most notably income, measures of volatility of income, and time spent in selfemployment (more details in the note to Figure 14). Table A2.1 of Cribb and Karjalainen (2023) shows that the average gender gap in pension participation is 5.5 percentage points after controlling for these factors.…”