Pensions blind spot needs work to help gig economy staff

Pension pressures
Pension pressures

A “blind spot” in the pensions system needs to be tackled to help gig economy workers boost their retirement savings, a report suggests.

Zurich said a shake-up is needed to reduce the risk of a gig economy long-term savings crisis, which would include expanding automatic enrolment into workplace pensions.

It said the UK gig economy includes five million people, ranging from those described as self-employed to those on zero-hour or agency contracts.

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 continued: “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.”

Gig economy workers could boost the size of their pension pot by up to £75,000 if a form of automatic enrolment were extended to cover all workers, research for Zurich suggests.

It said auto-enrolment should be expanded to self-employed people via the self-assessment tax return process.

A typical worker now aged 25 earning £25,000 could end up with a £75,600 lump sum at retirement, according to modelling from the Pensions Policy Institute (PPI) for Zurich.