The Chamber of Small and Medium Enterprises, GRTU, has called on the government to give the self-employed and business owners the recognition they deserved and introduce specific higher and more realistic pension capping rates for this group as part of the pensions reform.
In a statement this morning, it said that while it welcomed the fact that the recommendations put forward by the Pensions Reform Group were not envisaged to shock the economy through increases in contributions, it was concerned that the proposed reform did not necessarily provide a holistic solution that achieved tangible long-term results towards sustainability.
The GRTU believed that a more realistic approach specifically addressing the self-employed and business owners was required.
“Our self-employed and business owners have not only contributed heftily in financial terms over the years, but are also the main drivers of economic development and job creation. Their contribution must be acknowledged and translated into the pension they have contributed for and deserve.
“The current system is unjust especially when considering that other sectors of society, such as former members of Parliament, are treated differently with no maximum capping on their pension. This measure should not only ensure a fairer pension to this sector of society but also disincentivise under-claiming of income, upon which an individual is to be taxed,” it said.
The chamber said that a thorough reform needed to take into consideration the context of the self-employed which, in GRTU’s opinion, required specific measures to reflect their reality. It proposed allowing the self-employed to retire early for cases where they were close to their retirement age and their business was no longer feasible. It also proposed exempting the self-employed from having to stop working for one year when the opt-out option was taken.
The GRTU said incentives and measures being put forward had to be financially viable if take-up was to be registered once implementation was transposed from paper to practice.
“Some of the incentives proposed in the reform may seem welcoming on paper but do not make financial sense for end-users.”
One such recommendation was that opting to renounce pensions for a minor permanent increase. In practice, the GRTU said, it would take too long to recuperate the renounced pension itself.
An effective measure the GRTU believed would really incentivise pensioners remain active in the labour market was the reduction or removal of taxation on pensions for working pensioners, or removal of NI contributions.
However, the drive towards a higher working age, whether through incentives or imposed, also came with its concerns.
“These may include sector-sensitivity matters based on issues such as the extent of physical activity or health hazards this may pose on ageing persons; as well as issues related to productivity and career opportunities.
“A stronger overall reform is necessary to sustain first pillar pensions whilst incentivising diversification.
“GRTU believes that a long-term approach is needed to start addressing seriously the sustainability of the pensions system in the context of its social importance along with its economic viability. The change must be gradual however change to the status quo is necessary. Postponing will only make matters worse and make change more difficult and costly,” it said.