The UK is sleepwalking into a pensions crisis and must take urgent steps to boost the retirement savings of millions of gig economy workers, warns MHR.
The estimated 1.3 million workers in the gig economy, who are paid based on the number of jobs or ‘gigs’ they perform rather than receiving a traditional salary, risk having no pension and is leading calls for the Government to expand the automatic enrolment for workplace pensions to include the gig economy.
According to the Work and Pensions Committee the number of workers in self-employment has grown by nearly a million in the last decade, rising from 3.8 million workers to 4.8 million.
Recent research by the Association of Independent Professionals and Self-Employed revealed that only one-third of the self-employed UK workforce are paying into a pension.
Neil Tonks, Legislation Manager at MHR comments: “Despite attracting criticism for the way it allows unethical employers to try and sidestep basic employment rights, including holiday and sick pay, the gig economy continues to expand and shows no signs of slowing down. For its supporters it delivers a much-needed route into work and provides parents and carers with greater freedom and flexibility to fit their work around the lifestyle and caring responsibilities.
“Worryingly, however, gig workers often don’t have access to a workplace pension, and in most cases are not earning enough to put money aside into a private pension.
“Unless action is taken, we risk sleepwalking into a pensions crisis whereby a generation of workers, who perhaps require security the most, are left behind in a vulnerable position; trapped in low paid work, unable to save for the future and forced to work in their retirement years because they haven’t accrued enough years required to claim state pension.”
To avert a potential crisis, Tonks is calling on the Government to review how the pension system embraces modern working practices and provide clarity over the classification of workers in the gig economy.
He adds: “The lack of pension provision for the growing number of workers in the gig economy is a real concern which needs addressing fast. While many people may perceive gig-working as a short-term option and assume they will receive a pension at some point in their career, the reality is that many people get stuck in a rut and may work in this type of employment for longer than they initially envisaged, leaving them facing an insecure future.
“Expanding auto-enrolment to include the gig economy, or introducing a new ‘sidecar’ scheme exclusively for self-employed workers which reflects their variable income and allows them to put money aside for their pension and a separate emergency fund, will help a growing number of people build up a pot for their retirement and long-term security.”Discover flexible payroll