Construction Workers Face Retirement ‘Black Hole’ as Pension Take-Up Limited

Construction retirement

THE MAJORITY OF construction workers are not saving towards their retirement, research by Unite, the UK’s construction union, has found.

Following a freedom of information request to the Department of Work and Pensions, the government has revealed that official estimates show that 797,000 (employees) in the construction sector are paying into a pension of any form. This is from a total construction workforce of 2.225 million (which is divided between 1,507 employees and 712,000 officially self-employed workers), according to the Office for National Statistics figures.

It means just 36 per cent of the construction workforce is known to be paying into a pension. This is the figure for the entire construction industry. The percentage of blue collar construction workers contributing to a pension is expected to be much lower.

The number of self-employed workers paying into a pension is likely to be even lower. Even if they have a private pension, because they don’t receive any employer contributions, it is very unlikely that self-employed workers’ pensions will prevent poverty in retirement.

In 2017 the government rejected extending the auto-enrolment pension system to the self-employed.

The government says it has begun trialing using financial digital platforms to encourage the self-employed to save towards their pensions. In the FOI response the DWP said: We aim to commence the next stage of these trials this summer.” 

Why Don’t Construction Workers Pay into Pension?

Factors that result in construction workers not having a pension include:

  • Rampant bogus self-employment. With roughly half of blue collar construction workers being officially registered as self-employed, they are not eligible for the auto-enrolment scheme
  • The extensive use of umbrella companies. This means workers are required to contribute both employers’ and employees’ pension contributions, making them unaffordable for many
  • Short term engagements. These often result in workers believing it is not worth making pension contributions
  • Construction employers’ hostility to paying pension contributions
  • The low level of pay for unskilled workers

Destitute Generation

Unite national officer for construction Jerry Swain said: “These figures are deeply troubling. With the majority of construction workers not saving for retirement, we are creating a destitute generation of future pensioners.

“Even if workers are saving towards a pension, there is no guarantee that they are saving sufficient amounts to prevent poverty in retirement.

“The way that construction is organised, with short-term engagements, rampant bogus self-employment and nefarious schemes such as umbrella companies, it is incredibly difficult for construction workers to have confidence in their continued employment so as to allow them to consistently pay into a pension scheme.

“The government needs to take urgent action to begin plugging this black hole in construction pension saving. The consequences of not doing so do not bear thinking about.

“After a lifetime of hard manual work the ultimate ignominy for construction workers is to face poverty in retirement. Put simply, construction workers deserve better.”

>> Read more about pensions in the construction industry in the news

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