Pensions Myths ExplodedPosted on: 25 March 2008 by 50connect editorial
In two reports published the independent Pension Provision Group explode two popular ‘pensions myths’.
In two reports published the independent Pension Provision Group explode two popular ‘pensions myths’. Firstly, that self-employed people can all be relied upon to make adequate provision for their old age and secondly, that workplace based pensions are out of step with today’s labour market.
Speaking earlier about their report, ‘Pension provision and self-employment’, Tom Ross, the Group’s Chairman, said: 'Many in self-employment today run the risk of poverty in old age. The traditional view that self-employment is largely confined to professional people who can be relied upon to make adequate provision for their retirement still persists. We doubt whether this was entirely ever the case. But it is certainly not true now. Many, especially those in the ‘new’ forms of self-employment, are on low incomes without the means to fund their retirement. For them self-reliance can never be a realistic option and in our view they should enjoy the same security and redistribution as other low paid workers.
‘Experience of self-employment has also become more common and many more people will retire with experience of at least one spell of self-employment during their working lives.
‘Our conclusion is that the present policy distinction between employees and the selfemployed is outdated. Periods of self-employment should be brought into the State
Second Pension when it has become flat rate, on a compulsory basis, but with the option to contract out into a private pension.’
Presenting the findings of their second report, ‘Pensions and the labour market’, he went on to say: ‘There is a popular view that employment has become much more volatile with people experiencing more frequent job changes and, as a result, pensions based around the workplace are under threat. We have found this fear is greatly exaggerated. In the key years - generally after age 25 - the increase in job mobility has been quite small and our view is that pension provision through the workplace is still likely to be the best solution for most people.
‘But we do have two concerns. Firstly, more needs to be done to encourage young people to start saving sooner. Younger people do tend to change employers more often and, in our view, they are not sufficiently well served by the current arrangements for earning and transferring occupational pension rights. We suggest the Government review them.
‘Secondly, we share the Government’s concern about the age at which people, particularly men, are retiring. It has always been the case that early retirement can be attractive to the better off, but, for many, early retirement is likely to mean a prolonged period of low income and dependency on state benefits. As people are living longer, there is a clear need for society as a whole to encourage later retirement.’
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