Labour ‘should bring in workplace pension for self-employed’

In a report published on October 24, the Fabian Society called on the next Labour government to implement a shake-up in the sector, primarily calling for the introduction of workplace pensions for the more than 3mn self-employed workers earning in excess of £10,000 annually.

Under the proposal, people’s digital tax records would be automatically linked to a pensions account and 5 per cent of earnings would be deducted by default, with the right to opt out.

The think tank also proposed that the government would pay a matching bonus of 3 per cent of earnings, in place of the employer pension contributions that employees receive.

Sponsored by the Association of British Insurers, the report quoted research which showed that the share of self-employed workers saving into a pension plummeted to 16 per cent in 2018 from 48 per cent in 1998.

It also revealed that only 1 per cent of low earners are saving enough to achieve a decent minimum living standard in retirement.

Andrew Harrop, Fabian Society general secretary and author of the report, said that politicians from all parties should commit to major new reforms of the pensions system before the next general election. 

“Workplace pensions have come a long way since 2002 when the Labour party set up the Turner Commission. But after two decades of debate and reform, private pensions still do not promise adequate retirement incomes for most people,” he noted.

“We need a pensions system where everyone gets help to save enough to meet their future needs, and where the savings people build get converted into incomes for life that will rise with the cost of living.”

The report also proposed increasing minimum contributions for workplace auto-enrolment pensions to 12 per cent of total earnings by raising employer contributions, a proposal previously supported by the Pensions and Lifetime Savings Association. 

It also called for new pension credits for carers to reduce the gender pensions gap, noting that women reaching retirement have only one-third of the private pension assets of men.

The think tank is also calling for a change in how people access pensions at retirement, so that separate pensions are automatically consolidated into a single fund. It proposed that this single fund would then be converted into new, whole-of-retirement pension plans designed to increase with inflation.

ABI assistant director Rob Yuille said: “Helping people achieve adequate pensions so that they can enjoy financially secure retirements is the core purpose of long-term savings providers.”

In particular, he welcomed the ambition to increase overall contributions to 12 per cent and said the ABI believes this should be introduced gradually over the next 10 years.

“Calls for a solution to help self-employed people save for retirement is also an important measure, as too few are currently saving into a pension,” Yuille said. 

“It’s time to look at the future of pensions policy as a whole and we look forward to continuing to work with the Fabian Society on policy solutions, so that we can all enjoy the retirement we hope and work for.”

This article originally appeared on FTAdviser.com