Gig workers could be £75,000 better off in retirement
The gig economy now includes five million people, including the self-employed, and those on zero-hour or agency contracts. This is equivalent to one in six workers. These people don’t have workplace pension provision and relatively few have private pension provision either.
Zurich’s research showed that a typical worker now aged 25 earning £25,000 could end up with a £75,600 lump sum at retirement if auto-enrolment were extended. This is based on the Taylor review recommendation of enabling individuals to put aside 4% of their income when completing tax returns. This would add around £3,500-£4,000 to their annual income in retirement.
Chris Atkinson at Zurich UK, said: “The gig economy has rapidly brought about a redefinition of the contracts between employers and employees. 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 nineteenth century welfare system was overhauled for the 21st century world of work.
“Using tax returns to extend auto-enrolment 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 employees before they can retire. This will be at a time when they are more vulnerable to financial shocks from ill health – or may find it harder to get a job in the first place. As well as saving more of their income earlier in life, it’s vital gig workers ensure they have a financial cushion in place should the unexpected happen.”
‘Trade freedom for financial security’
The report also showed that many gig workers don’t have financial back-up if they are unable to work through illness or injury. Just 2% of gig economy workers have access to each of life insurance, income protection and critical illness insurance via their gig employer. Over half (53%) do not receive any benefits. Atkinson said gig economy workers often trade freedom for financial security, storing up a potential welfare crisis for the State.
Zurich is calling on the government to expand auto-enrolment to the self-employed via the self-assessment tax return process; to commission a government review of employment and working practices for older gig workers to consider what challenges older workers face and support employers to take on an ageing gig workforce; to introduce financial incentives for gig companies to offer income protection, potentially consider tax or National Insurance incentives. It is also seeking more financial education from gig companies to increase awareness among workers of existing savings and protection products.