Increased Pension Benefits for Unrecognized Workers Suggested by Workplace Statistical Data
The UK government has taken a significant step in addressing the pension savings gap for lower-income workers, self-employed individuals, and those in the gig economy. The revival of the Pensions Commission, first established in 2006, aims to tackle the barriers preventing these groups from saving adequately for retirement [1][3][4].
According to the Department for Work and Pensions' (DWP) annual statistics, as of 2024, nine-in-ten eligible employees, or 21.7 million people, are saving into a workplace pension scheme [2]. However, the participation rates among employees of 'micro' employers with less than five members of staff are far lower, at 59% [2].
Automatic Enrolment (AE), introduced in 2012, has been successful in increasing pension saving participation. Currently, 8-in-10 of all employees, or 23.3 million workers, are saving into a scheme [2]. Yet, many still save at the minimum levels, and many groups remain undersaved. Over 3 million self-employed people do not save into a pension, and only around 1 in 4 low earners save into a pension at all [1][4].
The freezing of the earnings trigger for Auto Enrolment at £10,000 led to a greater than usual increase in participation [2]. However, the statistics do not provide specific information about the uptick in pension saving among workers who are not eligible for Auto Enrolment after 2024. The demand for pensions among these workers has increased organically between 2023 and 2024, but pension savings rates remain low, at less than 40% [2].
The shift from Defined Benefit (DB) to Defined Contribution (DC) pensions has transferred risks to individuals, necessitating new policies to encourage adequate saving, especially for those lacking employer-sponsored pensions like the self-employed and gig workers [4]. The DWP identified a lower than average proportion of Pakistani and Bangladeshi workers paying into workplace schemes, at 68% [2]. However, the statistics do not provide specific information about pension savings rates among these workers for the years 2024 to 2025.
PensionBee's Invisible Worker campaign has highlighted that more than a million 'gig' economy workers are not currently paying into a pension [5]. The campaign calls for reforms that prioritize simplicity, affordability, and broader eligibility. The urgent need for policies to bring lower income, self-employed, and gig economy workers into pension saving was also highlighted.
The newly relaunched Pensions Commission, which is expected to publish detailed recommendations by 2027, will explore measures to overcome these barriers and design a fair, sustainable system [1][2][3]. The government acknowledges that concrete policies are still in the early stages, but the focus remains on understanding barriers and redesigning the pensions system to improve coverage and adequacy for these at-risk groups [1][3][4].
References:
[1] The Guardian. (2023, March 19). Pensions commission to focus on gig economy and self-employed. Retrieved from https://www.theguardian.com/business/2023/mar/19/pensions-commission-to-focus-on-gig-economy-and-self-employed
[2] Department for Work and Pensions. (2024). Annual statistics on workplace pension participation and savings trends. Retrieved from https://www.gov.uk/government/statistics/annual-statistics-on-workplace-pension-participation-and-savings-trends
[3] The Pensions Regulator. (2023, March 19). Government announces relaunch of Pensions Commission. Retrieved from https://www.thepensionsregulator.gov.uk/news/government-announces-relaunch-of-pensions-commission
[4] HM Treasury. (2023, March 19). Government announces relaunch of Pensions Commission. Retrieved from https://www.gov.uk/government/news/government-announces-relaunch-of-pensions-commission
[5] PensionBee. (2024, February 15). PensionBee launches Invisible Worker campaign to address pension savings crisis among gig economy workers. Retrieved from https://www.pensionbee.com/blog/pensionbee-launches-invisible-worker-campaign-to-address-pension-savings-crisis-among-gig-economy-workers/
In light of the Pensions Commission's focus on the gig economy and self-employed, there is a need for effective strategies in wealth-management and personal-finance to encourage these groups to save adequately for retirement [1]. As the demand for pensions among workers who are not eligible for Auto Enrolment after 2024 increases, it is crucial to design business solutions that accommodate these populations and address their low pension savings rates [2].
