Gig workers minimum wage – the pension impact
The resolution foundation has called for certain self-employed workers, chiefly those in the gig economy, to receive the minimum wage in a submission to the Taylor enquiry into modern working practices. Nathan Long – Senior Pension Analyst at Hargreaves Lansdown.
The calls for minimum wage to protect those working in the gig-economy along with on-going legal disputes around worker rights highlight the importance of the Taylor review into modern working. Expect the review to focus on the quality of work, the tax differences between differing groups and ensuring flexibility for both workers and platforms when it comes to gig work. With only 1 in 10 of the self-employed saving into a pension change is needed here too. The Conservative manifesto pledged to automatically enroll the self-employed into a pension, but with Brexit negotiations on-going, a slender majority and an issue that is challenging to solve, a solution may be some way off.
Considering gig workers separately is important. 26 weekly hours of work at the minimum wage would be enough for them to be auto-enrolled if they were employed. The Taylor review should address pension saving, as a tweak to the auto-enrolment system could partially bridge the cavern that is opening up between employees and the self-employed.’ The National Minimum Wage is currently £7.50 per hour for those aged over 25 but due to increase to £9 per hour by 2020.
Currently for 21-24-year-olds the rate is £7.05 per hour, for 18-20 year olds £5.60 and for 16-17 year olds £4.05.
The self-employed and pensions
One in ten of the self-employed saving into a pension – Number working self-employed has increased from 3.3 million at the turn of the millennium to 4.7 million now. Almost half (46 percent) of the self-employed spend at least ten years in this form of work. Providing sustainable income in retirement is expensive. Suppose you realise £200,000 from your business sale, this could provide an income of around £8,000 every year if you took a widely recognised ‘sensible’ level of four percent every year. Flexibility is increasingly important when it comes to retirement. People no longer work until State Pension Age and then finish work. In fact only 11.7% of men and ten percent of women actually finish in the year they hit SPA. Government research shows that four in ten people intend to work part-time or flexible hours before finishing work.