Official figures show sharp falls in self-employment during the coronavirus pandemic from a peak of 5 million at the end of 2019 down to 4.2 million in early 2022
Movement of workers from self-employment into the ‘employer’ workplace will mean more people benefit from auto-enrolment pension savings
However, much more work is needed to improve the pensions savings gap among the over 4.2 million self-employed currently excluded from auto-enrolment
Kate Smith, Head of Pensions at Aegon comments: “The ONS analysis highlights a dramatic fall in the number of self-employed since the onset of the coronavirus pandemic, similar to what was experienced during the financial crisis in 2008. And while there has been a slight increase in levels since the turn of this year, the number of those self-employed remains significantly lower than its pre-pandemic peak of 5 million people, which stood at 15.3% of the labour market.
“The biggest movement out of self-employment during the coronavirus pandemic was driven by flows into ‘employee’ status. Some of these workers have reclassified their employment status from self-employed to employee, prompted by the furlough scheme and delayed changes to off-paywall working rules (IR35), while others have moved and changed jobs. The good news for all eligible employees moving out of self-employment into the workplace is that they will benefit from saving into their employer’s pension scheme, a benefit they were previously excluded from. Once auto-enrolled, they will receive an employer contribution alongside their own pension contribution and government tax relief. This will provide a major boost to their retirement savings.
“However, despite the sharp fall over the last two years, over 4.2 million people remain in self-employment, with many of these not saving for retirement as they are excluded from auto-enrolment. Being excluding from auto-enrolment, the self-employed find themselves at a significant disadvantage when it comes to pension saving and progress in government policy is needed to ensure these people are supported.
“Pensions Minister, Guy Opperman, confirmed the government is on track to implement the 2017 auto-enrolment reforms by mid-2020s and we hope this also includes implementing a pension solution for the self-employed. We hope that the current changes in government won’t derail progress in this implementation date, although the fall-out from first Brexit, then the pandemic and also the current cost-of-living crisis may make this increasingly difficult to sell across Government.”
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