Millions of freelance and zero-contract workers could be left without any retirement savings as a result of a pension system “blind spot”.
A new report from Insurance group Zurich said a shake-up is needed to reduce the impact that the ‘gig economy’ has on workers’ ability to save for retirement.
It said that the UK gig economy includes five million people ranging from those who are self-employed to those on zero-hour or agency contracts.
To tackle the problem, Zurich believes more support needs to be given to these flexible workers in the form of an extension to the current auto-enrolment initiative.
The insurance firm found that gig economy workers could boost their pension pots if auto-enrolment was to be expanded to self-employed people via the self-assessment tax return process.
Chris Atkinson, head of consumer distribution 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.”
He went on to explain that many of these workers may have to work far longer than traditional employees before they can retire. And with the state pension age increasing and the value of traditional workers’ workplace pensions often falling short, even full time employees are likely to find themselves working longer than previous generations.
Chris Atkinson advises: “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.”
The insurance firm is also calling on companies to offer income protection to their flexible workers and said that the government should offer tax or national insurance incentives to compliant employers.
Worryingly, the risk of an insufficient pension pot isn’t exclusive to those with unpredictable or fluctuating incomes. With it becoming increasingly common for employed workers to change jobs after just a few years, many forget about the pensions they built up with past employers, potentially seeing them missing out on thousands of pounds when they come to retire.