The number of self-employed people in the UK now numbers five million, up more than 17% since auto enrolment was first introduced in 2012*. That is a huge swing in the profile of the workforce and means that hundreds of thousands more people are missing out on building a pension. The Conservative government pledged to address this issue in its 2017 manifesto and it’s crucial that it still does re-assess the way auto-enrolment rules fit around the new profile of the labour market and keep up with the changing nature of employment.
Auto-enrolment has been hugely effective at getting employed people saving for the future. The government’s focus on ensuring persistency rates remain high has seen very few workers captured by the policy choosing to opt-out. That shows the success of its strategy of relying on inertia and phasing up contribution rates.
But as part of a national savings strategy the government must focus on coverage across the whole population, not only on participation rates among eligible workers. The workforce is changing around us, with more people moving into flexible, part-time work and self-employment. Policy needs to keep up with the gig-economy, part-timers, side-hustlers and slashies.
If auto-enrolment fails to keep up with the changing shape of the labour force then it will disproportionately disadvantage women and younger workers. For example, while the employment rate for women is the highest on record, and the number of women working full-time is steadily growing, still over 40% of women in employment are part-time and are therefore more likely to be under the earnings thresholds for auto-enrolment. Likewise, we know that younger people are more likely to be in flexible work with multiple employers or some self-employment and they are equally likely to fall through the gaps in the system, such as the minimum earnings criteria.
*Based on the rise in overall self-employment since Oct 2012 https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/fulltimeparttimeandtemporaryworkersseasonallyadjustedemp01sa