CBI Objects To Plans For Forced Pension Contributions

by Robin Pilgrim, LawAndTax-News.com, London

21 February 2006

The Confederation of British Industry on Monday unveiled its proposals to help tackle the UK's emerging pensions crisis without compelling business to contribute to staff pension schemes.

Under Lord Turner's proposals for a National Pensions Saving Scheme (NPSS), employees opting in to a pension scheme would contribute five per cent of their earnings - four per cent from their salary and one per cent from National Insurance tax relief. Employers would be compelled to pay another three per cent, a total contribution of eight per cent.

In its submission to the Government, the CBI argued that auto-enrolment without compulsion is the best way of increasing pensions saving without undermining existing provision.

The CBI went on to suggest that forcing companies into compulsory pensions contributions would put hard-pressed firms, especially smaller ones, under great economic pressure and significantly raise labour costs while failing to boost savings levels overall.

For companies with existing schemes, particularly larger ones, the increased costs of higher take up rates could actually lead to a levelling down of existing pension provision, the CBI cautioned.

John Cridland, Deputy Director-General of the CBI, explained that:

"The CBI wants as many individuals and companies as possible in pension schemes and automatic enrolment is the best way to achieve this; it will overcome the existing inertia about pension provision among employers and employees alike."

"But forcing employers to contribute is neither fair, nor equitable or sensible. As the Pensions Commission says, it is not right to tell a 21-year-old striving to pay off his student debts, or saving for a deposit for a flat, that he must first save for his pension. So why should a small company be forced to pay into a pension scheme if doing so could put it out of business or prevent the creation of new jobs?"

"The CBI believes there must be an equal right to opt out for both business and employee so individual economic realities can be taken into account. Our proposals are therefore designed to cajole employers, not compel them, into voluntarily contributing to an employee pension saving scheme."

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