Extending auto-enrolment to gig workers could boost pension pots by up to £75,000, Zurich has revealed.

The Restless Worklife study, the first to use data from the gig economy to model applying auto-enrolment to gig workers, by the Pensions Policy Institute for Zurich, noted that of the current UK workforce of 32 million workers, one in six are currently a gig worker with no or restricted access to workplace benefits including a pension.

The UK-wide YouGov study of more than 600 gig economy workers found that an average worker, aged 25 earning £25,000, could end up with a £75,000 lump sum at retirement. This could be achieved by the Taylor Review recommendation that encourages individuals to save 4 per cent of their income when completing tax returns. Totalled with the state pension, this could result in a yearly income of £13,500 at retirement.

It was also realised that if the same worker was auto-enrolled into a workplace pension, removing the current restrictions on minimum earnings, they could end up with a final lump sum of £101,500. When added to the state pension this could lead to an income of £15,000 per year at retirement.

Moreover, to reduce the risk of gig workers missing out on long-term savings, Zurich has recommended that auto-enrolment should be expanded to the self-employed via the self-assesment tax return process; the commissioning of a government review of employment and working practices for older gig workers; the introduction of financial incentives for gig companies to offer income protection and more financial education from gig companies.

Zurich UK head of consumer distribution Chris Atkinson said: “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. It’s time our nineteenth century welfare system was overhauled for the 21st century world of work.

“Using tax returns to extend auto-enrolment to the gig economy would be a step in the right direction, but it’s no silver bullet and, on its own, is still unlikely to give individuals a big enough pot in retirement. The reality is that many gig workers may have to work far longer than even traditional employees before they can retire[…]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.”

RSA chief executive of the and author of the Taylor Review Matthew Taylor said: "I welcome this report from Zurich and the Pensions Policy Institute. Gig work has many benefits for workers and consumers but we need the right regulatory framework to protect workers and meet wider public policy goals. This report makes an important contribution to our thinking about the right pensions framework for 21st century work."

CBI head of employment and pensions Matthew Percival added: “Improving pension provision amongst the self-employed is key to raising living standards for millions of people. The government’s review of automatic enrolment is rightly exploring options for how to support and enable self-employed people to adequately save for retirement and the report by Zurich and the Pensions Policy Institute is a valuable contribution to the debate.”

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