Compulsory pensions plan under fire from employers

A plan to allow organisations to insist on staff joining their occupational
pension schemes has been widely criticised by employers’ organisations.

The recommendation is part of a package of reforms contained in the
Government-commissioned report by Alan Pickering published last week.

The report also included proposals to remove the requirement for
occupational pensions to be index-linked in line with inflation, and to take
away the requirement for schemes to provide survivors’ benefits.

Although Pickering’s proposals to simplify the pension system and reduce the
cost burden on employers’ schemes were broadly welcomed, giving employers the
powers to force staff to join pensions has raised concerns.

The CBI said the recommendations could help contain rising pension costs and
stabilise final salary schemes, but warned that few companies would want to
make pensions compulsory.

Director of HR policy at the CBI Susan Anderson believes forcing a scheme on
employees would be unpopular among those on short-term contracts or with
existing schemes.

A voluntary approach to occupational scheme membership is also favoured by
the CIPD.

CIPD’s assistant director general Duncan Brown said: "You can see some
companies where this wouldn’t do any good at all. I’d question how effective it
would be to force a pension scheme onto staff."

People could be forced into making unwise investments if compulsory pension
schemes were introduced, said Will Hutton, chief executive of the Work
Foundation.

However, Mark Childs, director of global compensation and benefits at
Fidelity Investments, said many companies would advocate the right to
automatically enrol staff on pension schemes.

"Some firms would prefer staff to have a choice, but others will feel
its in their employees’ long-term interests to be in the scheme and would like
the flexibility to insist," he said.

The Government is to consider Pickering’s recommendations as part of a wider
pensions Green Paper due in the autumn.

www.dwp.gov.uk

By Ross Wigham

Case study: Manufacturer goes against pensions tide

Manufacturing company H+H Celcon is
bucking the pensions trend by extending its final salary scheme to all workers
to help boost recruitment and retention.

Celcon’s personnel manager Neil Griffiths said the company
decided to include its entire 400-strong workforce in its final salary pension
scheme in an effort to motivate staff and make it an employer of choice.

Previously, only the firm’s non-factory workers had a final
salary scheme, which guarantees a pension based on salary at or near
retirement. It replaces a money purchase scheme.

Griffiths said: "I know it sounds like a clich‚, but we
genuinely believe we succeed through our people. We believe it [the move] is
worth the cost."

 "It’s unfair to
have both schemes. Money purchase schemes seemed good in the 1990s, but now
they are not secure enough," he added.

Unions welcomed the move.

Pickering’s key proposals

– More flexibility for firms to design occupational schemes

– Right to insist staff join pension scheme

– Scrapping of survivor benefits

– A new pensions regulator/adviser

– No index link to inflation

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