The Self-Employed and the Three Pillars of Pensions

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Pension participation during self-employment is receiving increasing attention in aging populations. The self-employed are known to participate in pension insurances to a lesser degree than employees. As a result, fears abound that they run an increased risk of old-age poverty, now that life expectancies increase. This article adopts the life-course perspective to shed new light on this topic. The life-course perspective underlines that, for many, self-employment is only a phase in a working career that is otherwise spent as an employee. Micro-level data from Finland and Germany are analyzed. These two countries have very different pension regulations for the self-employed: Finland has wide mandatory coverage, whereas Germany has a fragmented system with low mandatory coverage. Findings show that during self-employment, the Finns have much higher participation rates in both the public and private pension pillars. However, when pension-pillar participation throughout the entire working career is considered, the picture changes considerably. From this perspective, the self-employed in both countries have very high participation rates in the public pension pillar, and Germany also shows a considerable increase in occupational pillar participation. The findings suggest that the self-employed should not be treated as a distinctive social group. Rather, self-employment should be viewed as a phase during a person’s working careers. Accordingly, policymakers seeking to improve the pension participation of the self-employed might benefit from focusing on how employment and self-employment can best be combined across working careers.