Self-employed workers could be missing out on £91,512 in pension contributions

UK workers earn £26,664 a year on average. Those who are members of a company pension scheme** receive average employer contributions of £2,232 a year (8.4 per cent of annual salary) and contribute £945 themselves (3.5 per cent), making a total of £3,177 (11.9 per cent) annually in pension contributions.

Over the course of an average working life, the average employer contributions alone add up to £91,512 and self-employed workers, who can't join a company pension scheme, will miss out on this substantial contribution towards their retirement funding.

Analysis from Prudential also reveals that the level of employer pension contributions can differ significantly by industry. Public administration and defence employers contribute the highest proportion of annual salary at 15.2 per cent, equivalent to £4,439 per year. However, finance and insurance sector workers receive bigger monetary contributions from their employers, averaging £6,067 a year (11.7 per cent of annual salary), on account of their typically higher salaries.

Separate research by Prudential among self-employed workers, conducted last year, found that almost half (46 per cent) make no self-employed pension contributions at all to support them in retirement. While some respondents said they planned to draw upon other sources of income when they stopped working, almost a third (29 per cent) of business owners expected to have to rely entirely on the State Pension for their income in retirement.

Stan Russell, retirement expert at Prudential, said:

"Self-employed workers have to be even more proactive when it comes to saving for retirement, as they can't benefit from employer contributions in a company pension scheme. Saving into a pension gives valuable tax relief, while professional financial advice can be helpful in ensuring that they're saving enough for a comfortable retirement.

"We know from our research that a significant proportion of self-employed workers have no private pension and will rely solely on the State Pension in retirement. Often this is because they have prioritised the needs of their business over saving into a pension. However, the State Pension alone is not enough for a good standard of living in retirement, which is why saving as much as possible into a pension from an early stage is crucial."