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| Workers in the burgeoning gig economy face poverty in retirement unless the government acts to change its flagship pension policy and makes it easier for them to save, experts have warned. | Workers in the burgeoning gig economy face poverty in retirement unless the government acts to change its flagship pension policy and makes it easier for them to save, experts have warned. |
| The pensions minister, Richard Harrington, has indicated that he is considering ways to include self-employed workers into the flagship auto-enrolment scheme, but he has not confirmed whether this will be part of a review planned for next year. | The pensions minister, Richard Harrington, has indicated that he is considering ways to include self-employed workers into the flagship auto-enrolment scheme, but he has not confirmed whether this will be part of a review planned for next year. |
| Recent changes to the pension system have boosted the number of employees who save into one and benefit from contributions made by their employer. Anyone earning more than £10,000 from their firm is automatically enrolled into a pension, and their employer makes contributions, currently worth 1% of earnings. | Recent changes to the pension system have boosted the number of employees who save into one and benefit from contributions made by their employer. Anyone earning more than £10,000 from their firm is automatically enrolled into a pension, and their employer makes contributions, currently worth 1% of earnings. |
| However, those in self-employment or doing a patchwork of low-paid jobs are not able to save through the scheme. | However, those in self-employment or doing a patchwork of low-paid jobs are not able to save through the scheme. |
| Steven Cameron, pensions director at insurer Aegon, said the changing nature of self-employment meant that the government needed to act. “It is not sustainable government policy to exclude the self-employed, who are no longer made up solely of the traditional small business owner but now include a fast-growing contractor population,” he said. “The differentiation between employed and self-employed has been further blurred by the gig economy and the recent ruling that Uber workers should be treated as employees.” | Steven Cameron, pensions director at insurer Aegon, said the changing nature of self-employment meant that the government needed to act. “It is not sustainable government policy to exclude the self-employed, who are no longer made up solely of the traditional small business owner but now include a fast-growing contractor population,” he said. “The differentiation between employed and self-employed has been further blurred by the gig economy and the recent ruling that Uber workers should be treated as employees.” |
| Figures show the number of self-employed workers contributing to a personal pension have plummeted since the start of the century. About 1.1 million individuals were paying into a retirement fund in 2001-02, but by 2014-15 the figure had fallen to just 380,000. | Figures show the number of self-employed workers contributing to a personal pension have plummeted since the start of the century. About 1.1 million individuals were paying into a retirement fund in 2001-02, but by 2014-15 the figure had fallen to just 380,000. |
| Meanwhile, the government’s Family Resource Survey found that while 60% of working-age adults employed as staff had pensions, among the self-employed the figure was just 16%. Women were much less likely to be making payments into a scheme, with participation at just 12% against 17% for men. | Meanwhile, the government’s Family Resource Survey found that while 60% of working-age adults employed as staff had pensions, among the self-employed the figure was just 16%. Women were much less likely to be making payments into a scheme, with participation at just 12% against 17% for men. |
| Former pensions minister Steve Webb said there was “not a moment to wait” to address the issue of falling contributions by self-employed workers. “Pension membership among the self-employed – and self-employed women in particular – is chronically low and falling.” | Former pensions minister Steve Webb said there was “not a moment to wait” to address the issue of falling contributions by self-employed workers. “Pension membership among the self-employed – and self-employed women in particular – is chronically low and falling.” |
| Ros Altmann, who was pensions minister until the summer, said while self-employed workers had in the past been well-paid, “things are different for those young startup, gig economy type roles”. She said: “With auto-enrolment the lowest opt-out rates have been amongst the young, so if we have got a lot of young people starting their own businesses there will be a potential divide in the future between the haves and have-nots in pensions”. | Ros Altmann, who was pensions minister until the summer, said while self-employed workers had in the past been well-paid, “things are different for those young startup, gig economy type roles”. She said: “With auto-enrolment the lowest opt-out rates have been amongst the young, so if we have got a lot of young people starting their own businesses there will be a potential divide in the future between the haves and have-nots in pensions”. |
| Experts said they were most concerned about those in their 40s, who comprise about two-thirds of the self-employed workforce. They will be locked out of the new lifetime Isa (Lisa), launched by George Osborne to encourage savings for property and retirement. | Experts said they were most concerned about those in their 40s, who comprise about two-thirds of the self-employed workforce. They will be locked out of the new lifetime Isa (Lisa), launched by George Osborne to encourage savings for property and retirement. |
| Webb said his biggest concern was older workers who had started their own businesses only recently, perhaps after redundancy. “If you’re 53 and you’ve been in work previously and not built up a big pension, you are going to struggle – this is the group of people who won’t be able to stop working,” he said. | Webb said his biggest concern was older workers who had started their own businesses only recently, perhaps after redundancy. “If you’re 53 and you’ve been in work previously and not built up a big pension, you are going to struggle – this is the group of people who won’t be able to stop working,” he said. |
| Research by pensions provider Old Mutual found that while 84% of 30- to 45-year-old employees were contributing to a pension scheme, among the self-employed just half were paying towards their retirement. Those who were saving were putting in an average of £290 a month, while their employed counterparts were saving £400. The main reason for not saving was not having enough money left to put by. | Research by pensions provider Old Mutual found that while 84% of 30- to 45-year-old employees were contributing to a pension scheme, among the self-employed just half were paying towards their retirement. Those who were saving were putting in an average of £290 a month, while their employed counterparts were saving £400. The main reason for not saving was not having enough money left to put by. |
| Jon Greer, pensions expert at Old Mutual Wealth, said: “The rapidly growing self-employed population aren’t saving enough for retirement and are sleepwalking towards poverty in later life. | Jon Greer, pensions expert at Old Mutual Wealth, said: “The rapidly growing self-employed population aren’t saving enough for retirement and are sleepwalking towards poverty in later life. |
| “The government needs to step in and help. Ahead of the conservative party conference in October, Theresa May ordered a review of employment regulation and practices, but action is also needed.” | “The government needs to step in and help. Ahead of the conservative party conference in October, Theresa May ordered a review of employment regulation and practices, but action is also needed.” |
| He called on the government to increase the age limit on the Lisa to 55 and consider allowing self-employed people to make withdrawals so they were not worried about locking up their cash. | He called on the government to increase the age limit on the Lisa to 55 and consider allowing self-employed people to make withdrawals so they were not worried about locking up their cash. |
| Even those in employment may be missing out, the TUC warned. It estimates that 4.6 million workers do not qualify for auto-enrolment because they earn less than £10,000 a year. Because the limit applies to a job rather than total earnings, if you do more than one low-paid job, you will not automatically qualify for a pension. | Even those in employment may be missing out, the TUC warned. It estimates that 4.6 million workers do not qualify for auto-enrolment because they earn less than £10,000 a year. Because the limit applies to a job rather than total earnings, if you do more than one low-paid job, you will not automatically qualify for a pension. |
| The Pensions Policy Institute has estimated that about 80,000 people would be due a pension if they could add together earnings from their first and second jobs. Again, women are most likely to lose out, making up 60,000 of that number. | The Pensions Policy Institute has estimated that about 80,000 people would be due a pension if they could add together earnings from their first and second jobs. Again, women are most likely to lose out, making up 60,000 of that number. |
| Tim Sharpe, policy officer at the TUC, said: “Automatic enrolment has been a great success, giving 6 million more people access to a workplace pension. | Tim Sharpe, policy officer at the TUC, said: “Automatic enrolment has been a great success, giving 6 million more people access to a workplace pension. |
| “But it mustn’t be allowed to become a policy that works well for men in traditional full-time work but excludes others. Millions of low-paid workers, most of them women, are still missing out. We need to remove the barrier of the earnings trigger so that the millions of workers in part-time work, including those holding down multiple jobs, are automatically enrolled into workplace pensions too.” | “But it mustn’t be allowed to become a policy that works well for men in traditional full-time work but excludes others. Millions of low-paid workers, most of them women, are still missing out. We need to remove the barrier of the earnings trigger so that the millions of workers in part-time work, including those holding down multiple jobs, are automatically enrolled into workplace pensions too.” |
| Self-employed workers have been helped by changes to the state pension, which brought the amount they can claim in line with that of workers, at just over £8,000 a year. | Self-employed workers have been helped by changes to the state pension, which brought the amount they can claim in line with that of workers, at just over £8,000 a year. |
| But Webb said the government should consider increasing the national insurance contributions paid by the self-employed and diverting the extra money into pension schemes for them. “We have the 2017 review of auto-enrolment coming up and we absolutely have to address this problem,” said Webb. | But Webb said the government should consider increasing the national insurance contributions paid by the self-employed and diverting the extra money into pension schemes for them. “We have the 2017 review of auto-enrolment coming up and we absolutely have to address this problem,” said Webb. |
| The government said that it had not confirmed which groups would be included in the review of auto-enrolment, but in an interview with the Financial Times Harrington said looking at how to extend auto-enrolment to the self-employed “should be the kind of thing that we are talking about”. | The government said that it had not confirmed which groups would be included in the review of auto-enrolment, but in an interview with the Financial Times Harrington said looking at how to extend auto-enrolment to the self-employed “should be the kind of thing that we are talking about”. |
| He added: “Many self-employed people could now be earning the minimum wage, maybe a bit more, but it is complicated. In the end we have to look at them being included in an envelope like the automatic enrolment system – and the same with people who have multiple jobs.” | He added: “Many self-employed people could now be earning the minimum wage, maybe a bit more, but it is complicated. In the end we have to look at them being included in an envelope like the automatic enrolment system – and the same with people who have multiple jobs.” |