Pension problems loom for the self-employed
I was asked to be an “expert” on a BBC Radio Scotland call-in programme on pensions and retirement. I was there to talk about finding an income by starting your own business. I suspect there was a feeling that starting your own business was a way of the retired developing a satisfying life style, but the very articulate callers made it clear that poor pensions, despite a lifetime of payments, was a major gripe.
My fellow expert, Dan Hyde, the pensions reporter on www.thisismoney.co.uk, found himself, against his better judgement, defending the pensions industry. My other co-expert, Frances Fay (www.francesfay.co.uk), author of the Good Retirement Guide found herself under attack with the familiar line “It’s alright for you”. I was luckier thanks to a jaunty octogenarian who had created his own business driving trucks around and was clearly loving it.
But just when you leave the bus-stop three buses going to your destination pass you by. Immediately after the programme three pieces of research on pensions self-presented on my computer screen.
The first was reported in the Mature Times. Retirement specialist Partnership reported that 77 per cent of all the annuities they dealt with were for pension pots of around £30,000. This would buy £40 per week to top up the state pension of £97.65 (assuming you were entitled to it all – many women now in the 50s are not). This is roughly a quarter of the UK average male and female wage of £500 per week. No wonder the callers to BBC Radio Scotland complained!
But then came Ernst & Young’s report for the 2020 Public Service Trust at the RSA entitled “The Deficit: A longer Term View” http://www.2020publicservicestrust.org/publications/
Basically they were saying that an ageing population along with the cost of climate change and three other public expenditure drivers would ensure that the UK had an unsustainable budget deficit. If I understood the argument, the cost of state pensions and welfare for an ageing population, alongside the other public expenditure drivers, would mean that the UK had to borrow more and more from the money markets because we would not be able to meet the budget deficit from higher taxes or public expenditure cuts. The message is that unless we start to make difficult choices, “we’re doomed”.
Then up pops a message from the International Longevity Centre with a research review on the future of retirement (http://www.ilcuk.org.uk/). The review reported on a survey of 280 people aged 50 – 69, finding that of those above SPA (state pension age) and still working, one in three was self-employed. However only 56 per cent of the self-employed had a pension compared to 72 per cent of those who had been or were employees. What is clear is that the self-employed retire much later. This accords with PRIME’s own anecdotal evidence.
What do we make of all this? Well in my view the chances of improved pensions over the next decade or so are just about zilch. If anything there will be continued pressure to keep the state pension as low as possible. Just raising the retirement age is not going to help – already almost one person in three between the ages of 50 and SPA is workless. Pretending people are able to work longer is a self-delusion.
As a nation we need to change our view of older people and their contribution to the labour market. If we want to help older people to continue to be active in the labour market, increase individual and national wealth and reduce the cost of an ageing population, we just have to invest in self-employment support for older people.
Posted on Monday, June 21st, 2010
Under: Campaigns and policy, Laurie South, PRIME blogs | No Comments »



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