In order to prevent future pension crises, under-pensioned and precarious workers in the modern economy need a long term and sustainable vehicle for retirement saving, but the Taylor Review missed an opportunity to address this
Precarious workers – those in low paid and insecure work, some self-employed, temporary contracts, agency work and zero hours contracts (ZHCs)– have rapidly increased in numbers and account for approximately 4 million people (15% of the workforce). Precarious employees are also under-pensioned, lacking access to workplace schemes, and often earn insufficient amounts to save adequately or financially plan for later life. As such, they are most at risk for poverty in retirement, because they deviate most substantially from the ‘policy stereotype’ upon which pension provision is developed to cater for.
The ‘policy stereotype’ for the traditional state pension policy was male, working continuously from age 21 – 65, with median earnings at each age and a private pension contribution of 8% of salary. In previous research I have argued that this policy stereotype is influenced by heteropatriarchy and consequently makes the different occupational experiences of women invisible. But we can see that it is also marginalises other groups and individuals who cannot conform to this stereotype, mainly because they do not share the experiences of a securely employed, well paid, male. More recently we have seen another policy stereotype emerge for the purposes of Automatic Enrolment Pensions, and the new state pension. However, this stereotype still privileges the experience of individuals who tend to have full or part-time working arrangements, and who are employed. As such, the under-pensioned remain ignored during the formulation of pension policy.
Sadly, Matthew Taylor’s recent review of Employment Practices in the Modern Economy squandered his opportunity to properly challenge or transform this policy stereotype. Despite pensions being part of Taylor’s remit, his report mentions ‘pension(s)’ only 40 times. If we eliminate references to government committees, officials, an overview of pension saving, and so on, the report only directly discusses ‘pension(s)’ with reference to potential solutions/recommendations 4 times. The result is that the Taylor Report largely focusses on employment practices and protections, with very little consideration of pension rights and practice. Taylor’s main contribution is to acknowledge that self-employed workers should somehow have auto-enrolment pensions extended to them. This would undoubtedly help some under-pensioned workers, but many precarious workers are not self-employed, with low, unpredictable incomes, and with little financial resilience or scope to save meaningfully for retirement.
This is a serious omission by Taylor and his team, as whilst the self-employed are a heterogeneous group, in 2014 just 17% of them were saving in a private pension, a drop of 40% over 16 years. In addition, there are currently about 905,000 workers on ZHCs and 800,000 agency workers many of whom make up the ranks of the under-pensioned. These workers ordinarily do not have access to occupational pension provision and are less likely to be covered by auto-enrolment because of low pay or short-term contracts. The number of people automatically enrolled in a pension has increased in recent years, from 10.7 million in 2012 to 15.1 million in 2016. However, workers earning less than £10,000 a year are not eligible for auto-enrolment, thus excluding low earners and excluding precarious workers from this particular policy solution. Likewise, the proliferation of ZHCs also means that ZHC workers with multiple jobs miss out on auto-enrolment, even if they earn enough to qualify.
The fundamental flaw of Taylor’s review is that it is predicated on a naturalised neoliberal economic assumption that risk can be offset from individuals now, to individuals in the future. Further, it promotes the belief that if individuals engage in a vertical transfer of wealth to their future selves, we can solve the problem of low paid and precarious work. This approach also promotes the belief that if we can solve the problem of insecure work now, we don’t need to worry too much about pensions. But solving one, does not solve the other, and what Taylor offers us is a superficial solution, which means the under-pensioned remain ignored.
The Taylor report also ignores the broader crisis in pension provision, and how precarity has been used in recent years by organizations to renegotiate pension settlements with their workforce, and appropriate value back. These strategies play out in a number of ways; closure of pensions schemes, devaluing of pension pots, cashing-in pensions, and occur alongside the driving down of wages, whilst companies simultaneously appropriate value that used to pay more lucrative rates of wages for employees, and higher pension contributions. Younger and precarious workers are predominantly affected, and sadly the minor tinkering recommended by Taylor offers these under-pensioned workers little chance of improved pension prospects.