Commenting on the pensions implications for gig workers following today's publication of the Matthew Taylor review, Philip Smith, workplace savings leader at PwC, said: "The review's focus on today's evolving workforce shines a light on the many complexities of modern working practices. While there is rightly a lot of attention on how workers such as those working in the gig economy are treated today, more focus need to be placed on how these workers will fund their retirement in future.
"Despite enrolling nearly 8 million people into a workplace pension since its inception, auto enrolment only applies to those who are employed, aged 22 and earning at least £10,000 a year. The self-employed are not yet required to contribute, and this is a problem for many thousands of gig economy workers. Without any employer to enrol them, many of the self-employed are unlikely to voluntarily save for their retirement.
"We welcome the review's suggestion of using the current system to make effective changes, perhaps by auto-enrolment via the self assement process. Self employment has been one of the economy's key growth areas, and the lack of long-term saving highlighted in the review risks storing up problems that will need addressing if we are to ensure all workers have a chance of achieving a reasonable and comfortable retirement.
"The Government has already announced that the subject of gig economy workers and the self employed will be part of the DWP's comprehensive review of auto-enrolment regulations this year. Finding a way to ensure that all areas of the workforce benefit from the success of auto-enrolment is an area that urgently needs addressing if we want the UK to have a pension system that provides an adequate retirement for all."
Malcolm McLean, Senior Consultant at Barnett Waddingham, said; “As expected, the Taylor review has strongly supported the need to find ways of increasing pension saving for the self-employed, but has refrained from making any firm recommendations on detail.
“It has been the view of the pensions industry, for some time that the growing army of unpensioned self-employed workers should be brought into the ambit of auto-enrolment. Surely the question now is not if this should happen, but how and when it can be best achieved.
“The possibility of using self-employed workers’ tax returns and diverting a percentage of their profits and gains into an approved pension saving scheme has merit, this may be a way of addressing some of the more obvious logistical problems involved. As far as possible, however, the basis should mirror that in use for employees with a specified 4% contribution rate plus 1% tax relief. A further cash top-up from the government in lieu, as it were, of a separate employer contribution - the self-employed, of course, are their own employer - is worthy of consideration.
“However, the self-employed are a diverse group and include not only sole traders, but many large business owners for whom such top-ups from public funds could well attract criticism.
“Whatever system is eventually decided upon, “nudging” the self-employed into greater pension saving is long overdue and should be tackled as soon as possible. It remains to be seen whether, following the post-Budget U-Turn on self-employed national insurance rates, the government has the political will to bring this about sooner rather than later.”
Graham Vidler, Director of External Affairs, Pensions and Lifetime Savings Association, commented: “Almost five million people or 15% of the UK workforce identify as self-employed. This has grown 25% in the last ten years at the same time as pension saving among self-employed people has fallen precipitously1.
“New rights for those working in the gig economy are welcome and Government needs to provide clarity around dependent contractors and automatic enrolment. Dependent contractors should be treated as workers for the purposes of automatic enrolment and be automatically enrolled into a workplace pension. Government now has a window in which to address this.
“Failing to take these steps could accidentally create different classes of worker: those with automatic access to workplace pension saving and an employer contribution and those without. This is a long-term problem which we have the opportunity to remedy now.”
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