The experience of the coronavirus crisis has led to predictions about how the nature of work will change once we emerge from the pandemic.
Already, the lockdown has irretrievably altered what was considered the traditional workplace, with millions now working from home during the lockdown.
This trend towards online work is predicted to accelerate post crisis as companies look to new ways of tapping labour to save costs and to operate while Covid-19 remains a threat.
It is here that policymakers need to urgently consider whether the current pension system – built on the foundations of the traditional workplace – is still fit for purpose.
The chief concern about the threat an acceleration in online work poses for pension adequacy centres on the changing nature of the labour market.
Currently, employees are enrolled into a workplace pension by their employer if they meet certain conditions, chiefly if they earn more than £10,000 a year and are aged between 22 and state pension age.
This system has seen more than 10 million employees automatically enrolled into a workplace pension in thousands of companies around the UK since 2012.
However, the success of automatic enrolment has overshadowed a darker reality for the millions who were excluded from the programme because they did not meet eligibility criteria.
Cracks in the automatic enrolment system were already starting to emerge prior to the crisis due to an explosion in the growth of workers not eligible for the programme, including many low-paid, part-time staff and the fast-growing army of self employed.
Around 5m individuals are currently regarded as self employed, including many in the booming “gig economy” where individuals use online platforms to secure work and one-off jobs.
The so-called gig workers are not just Deliveroo riders and Uber drivers, they are also freelance coders, graphic designers and other qualified professionals using platforms like Upwork.
As employers are not required to auto-enrol the self employed into a workplace pension, this class of workers miss out on valuable compulsory minimum pension contributions paid by the employer to those eligible for the programme.
While the self employed are free to set up their own pensions, in reality few do.
Prior to the current pandemic, a pension crisis for the self employed was already brewing with barely one in seven of these workers in 2017/18 putting money aside in a pension. This was a big fall from nearly one in four a decade earlier.
While the full impact of the crisis on the labour market is yet to be known, there are signs that demand for independent contractors will flourish. Already, food retailers are partnering up with online platforms to deliver groceries to customers too scared to leave their homes due to Covid-19.
Some companies facing a Covid-19 cash crunch are replacing permanent employees with “agile” talent working remotely around the world and employed on a freelance basis. These trends are troubling for any government looking to improve pension adequacy across the population.
So what could the government do to defuse the ticking self-employed pensions timebomb? To start it needs to abandon notions that soft tactics, such as online marketing prompts, will be sufficient alone to turn the dial on self-employed pension saving. When online nudges were tested on consumers last year, the results proved disappointing in getting those who took part in the trial to engage with their pensions.
Secondly, it needs to go back to the drawing board and reconsider proposals such as defaulting the self employed into pension saving through the self-assessment process.
Under this option the tax return is used to automatically enrol self-employed workers into pension provision, unless they choose to opt out. The tax return should also spell out the tax advantages of enrolling in a pension, in terms of pensions tax relief.
It also needs to urgently reconsider lowering, or even scrapping, the £10,000 automatic enrolment earnings trigger, so the low-paid, including part-time workers and many on zero- hours contracts, are less likely to miss out on the benefits of a workplace pension.
Finally, a review of workplace rights is needed to address the core driver of retirement insecurity for many gig and temporary workers, and that is job insecurity.
Prior to Covid-19, millions of self-employed workers were already sleepwalking into a retirement crisis due to lack of pension provision. If the government does not act soon to modernise the retirement system for the self-employed then their predicament could get even worse.