LCP’s David Fairs submits plans to the pension commission to boost retirement security for the self-employed
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LCP Partner David Fairs has submitted a proposal to the Pensions Commission to encourage the self-employed to target a desired retirement income and to commence funding for a target level of pension, while accounting for their irregular income and the nature of their work.
The paper was written by David in conjunction with Arun Muralidhar, Founder of Mcube Investment Technologies LLC. They propose that SeLFIES (Standard-of-Living, Forward-starting, Income-only Securities) could be a solution to the current problem of adapting Automatic Enrolment for those that are self-employed and also help Government meet its target for debt issuance.
SeLFIES would be a single, liquid, low-cost, low-risk (government-issued) instrument, potentially purchased in slices as small as £1 at a time off either the web or an app. The idea in practice is for a government to issue a bond, that pays nothing until an individual reaches retirement age at 65. But after retirement age, SeLFIeS pay an amount, say for a fixed period. The fixed period would be set around average life expectancy at retirement, say 20 years.
David Fairs commented:
“Automatic Enrolment has been extremely successful in increasing the number of employees saving into a workplace pension but over 3 million self-employed are not saving into a pension.
“As well as building a predictable retirement income, it also provides a mechanism for Government to meet its target for debt issuance – a potential win-win-win for self-employed, the Government and the financial services industry. Brazil has started a similar system and take up has been impressive, so it’s food for thought.”
You can read the proposal here.
