AE could 'give gig economy workers £75,000 pots'
Extending auto-enrolment (AE) to workers in the gig economy could grant them a lump sum of £75,600 at retirement, Zurich and Pensions Policy Institute (PPI) research suggests.
This could be increased to £15,000 if the current AE system was applied, with the lower earnings threshold scrapped, the report concluded, using modelling by the PPI for Zurich based on a YouGov survey of 600 gig economy workers.
Around five million people, or one in six workers, are self-employed or employed on zero-hour or agency contracts, and are classed as gig economy workers.
Zurich head of consumer distribution Chris Atkinson said it was time to rethink the pension system.
"The gig economy has rapidly brought about a redefinition of the contracts between employers and employees," he said."However, there is a blind spot in the current pension system.
"Gig economy workers don't have access to a workplace pension, meaning millions aren't saving enough for retirement. It's time our 19th century welfare system was overhauled for the 21st century world of work."
The insurer recommended that the self-employed could be brought into AE through the self-assessment return process at initial contributions of 4% of income, with this then rising to 8%"when appropriate". This is similar to an approach put forward by Royal London and Aviva earlier this year.
Atkinson continued:"Using tax returns to extend AE to the gig economy would be a step in the right direction, but it's no silver bullet and, on its own, is still unlikely to give individuals a big enough pot in retirement. The reality is that many gig workers may have to work far longer than even traditional employers before they can retire."
For this reason, the insurer also recommended that the government should launch a review of employment and working practices for older gig economy workers, as well as expand financial education provided by companies in the sector.
The research came as the government's statutory review of AE headed into its final month of analysis before it reports back on its findings and recommendations in early December.
The review is considering the scope of the AE programme, and is expected to make recommendations on how to bring at least the self-employed under its wing.
Gig economy workers' rights have been strengthened over the past year with court cases determining Pimlico Plumbers and Uber staff were"workers" and therefore entitled to receive workplace benefits, including pensions.
However, the nature of the contract was crucial to each determination, meaning the rulings are not necessarily applicable across the gig economy sector.