An independent think tank affiliated to the Labour Party has suggested that Sir Kier Starmer should promise to introduce a new workplace pension for self-employed people. The Fabian Society said Labour needed to copy the radical approach of the Tuner Commission two decades ago, which encouraged pension saving through opt-out schemes.
There needs to be a new pension for more than 3 million people who work for themselves and earn more than £10,000 annually. Under their proposal, a self-employed worker’s digital tax records would be linked to a pension account and 5% of earnings would be deducted by default. The government would pay a bonus of 3% of earnings in place of the pension contributions from their employers that employees receive, and there would be the right to opt out.
The recommendation comes as part of a broader report into pension savings, worryingly it found that the proportion of self-employed workers saving for a pension had plummeted from 48% in 1998 to 16% in 2018. Pension auto-enrolment for self-employed people has previously been considered by the government, but could complex in practice if requiring clients of self-employed people to make “employer” pension contributions. There would be administrative difficulties for clients to make two payments (one to the self-employed person and one into a pension) and also regarding the charge rate for self-employed people. This new proposal simplifies all those issues by requiring the government to pay the “employer” contributions, and by linking the initiative to digital tax records already held by HMRC.
Andrew Harrop, the general secretary of the Fabian Society and author of the report, said:
“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. We need a pension 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.”