A new report on better pension provision for the self-employed has recommended that all workers receive a flat-rate tax bonus of 30%, regardless of their employment status.
This was the main proposal outlined by the Royal Society of Arts (RSA), which made an overall total of 12 recommendations in its report. The RSA said that workers should get the bonus no matter what they earn, meaning that they could each deposit only 70p for every £1 that they wish to put into their pensions.
The widespread eligibility for this bonus would help three-quarters of current retirement-savers, including self-employed workers who earn low or mid-level incomes.
The RSA put forward its recommendations in its Venturing to Retire report. It said that the bonus would be affordable for the Exchequer but added that an independent review should take place first.
The report also discusses keeping the term “bonus” in place because “Research…suggests the word ‘bonus’ is contentious, owing to the fact the money is merely a rebate of tax already paid, [yet] its connotations with gaining something could have a strong effect on saving incentives.”
If the proposal were to go ahead, then a self-employed worker earning £15,600 per year who paid 5% of his or her salary into a private pension would see tax relief increase from £195 to £335 per year.
Workers earning around £30,000 under the same conditions would also see their tax relief rise, but those earning £60,000 would see a fall in their tax relief.