The way we work is changing and on my way home tonight, the chances are I’ll see Deliveroo cyclists in their high-vis jackets and Uber cars on the streets. While the gig economy is one of the most visible and dramatic ways in which the nature of work is changing, self-employment in a broader sense is becoming far more common with 5 million people or 15% of the workforce now classed as self-employed. These changes have prompted debates about workers’ rights and job security which Matthew Taylor set out to examine in his Review of Modern Working Practices.
Now that we have the government’s response to the review we find ourselves disappointed. It’s hard to argue with plans to enforce sick and holiday pay for vulnerable workers and greater stability of job contracts, both of which will make a real difference to those affected. However, we believe an opportunity has been missed to address a growing pension gap between the employed and self-employed. In the UK pension provision is largely delivered through the workplace, via auto-enrolment, so the self-employed, including gig-economy workers are currently excluded. According to the Office for National Statistics just 25% of self-employed people are currently saving into a pension.
There’s a real risk that as time goes on and the number of self-employed grows a large proportion of the population will reach retirement age with insufficient savings. For those unable or unwilling to keep working, this will create a significant problem. In our view we need to find a way to extend auto-enrolment and the equivalent of employer contributions to the self-employed. A variety of ideas about how to tackle this challenge, including raising National Insurance contributions for the self-employed have been floated, but there’s no real consensus.
For us this is one of the missing pieces of the Taylor review and we’ll continue to press for progress on what we think is an issue that could eventually undermine the success of auto-enrolment.
Kate Smith, Head of Pensions at Aegon