Construction sector building towards a 'pensions time bomb'
SOME alarming news just in from the construction sector has again thrown light on one of the major problems facing so many industrial workers: low levels of pension saving among the self-employed.
This affects the majority of self-employed people, not just on our building sites, but right across the land – so if you work for yourself, even if you've never been on a building site in your life, this affects you.
Let's start by talking about the problems with Unite union members who do work on a building site. Unite has just obtained data from the Department of Work and Pensions (DWP) showing that less than a quarter (23 per cent) of ‘blue collar' construction workers are participating in a workplace pension scheme.
Unite defines ‘blue collar' as comprising skilled trade occupations, elementary occupations, and process, plant, and machine operatives.
The Office for National Statistics estimate that there are 1.5 million blue collar construction workers, but the DWP revealed just 349,000 of them are saving into a workplace pension.
While eligible workers employed by companies must be auto-enrolled into a workplace pension, self-employed workers do not, which brings us to the underlying problem for Unite's construction membership.
Unite said that in construction, ‘bogus self-employment' is rampant. This is where the employer classifies workers as self-employed to avoid paying them national insurance, holiday pay, sick pay, and also avoid auto-enrolling them into a pension, with the employer pension contributions that would entail.
Unite condemned in the strongest terms what it called the government's failure to look after self-employed workers.
Needless to say, no national insurance means no saving for the basic state pension, and no pension contributions means no workplace pension. It's a ‘double whammy' that could prove disastrous for workers in the long term, but with so little help from government at the moment, they are left to sort out retirement saving for themselves, for instance by setting up a personal pension.
We emphasise again, construction is just one part of this, the problem is widespread among all self-employed. A report earlier this year showed that the self-employed who do have a pension are at the higher end of the earnings spectrum, paying tax at 40 per cent, ie earning more than £46,350. Most self-employed earn less than that, and seem to feel they don't want or simply cannot afford a pension.
In construction, Unite says short term contracts and placements again discourage workers from looking at a pension for themselves, and of course unpredictable work patterns affect the broader self-employed community as well.
In one case which Unite is now taking to court, one of the UK's larger construction companies claimed in documents that its workers were employees, but told many individuals they were self-employed. They were paid via a subsidiary that took a slice of their wages for the payment service - and of course were paid none of the benefits mentioned.
Incidentally, bogus self-employment is not just a problem here in Northern Ireland and Great Britain. We recall that last July in Dublin, the government also had to clamp down on employers who falsely mark staff as self-employed, and fines for this were doubled to €25,000. Companies in the south were seeking to avoid paying holiday pay, sick pay, and PRSI, the contributions which fund the social welfare system.
Commenting on this month's findings, Unite assistant general secretary, Gail Cartmail said that eventually they “will result in hundreds of thousands of construction workers being forced into poverty when they retire.”
The construction industry's 1.5 million blue collar workers are just a part of the five million self-employed in the UK. All face the same challenges, between fluctuating income, but most of all, government failure to bring them into auto-enrolment pension schemes.
The plight of the self-employed across all sectors is just one part of what has become known as the ‘pensions time bomb' that may create a new generation living in ‘pensioner poverty' as this century progresses.
Could an hour spent taking financial advice on a pension perhaps be the best piece of working for yourself you will do this year?
:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice Ltd” or at www.mkennedyfinancial.com