The CBI has urged the government not to enforce compulsory pension contributions from employers as recommended by the Pensions Commission.
Under Lord Turner’s proposals for a National Pensions Savings Scheme (NPSS), employees would contribute 5% (1% being National Insurance tax relief) with employers forced to add 3%.
But the CBI said this was unfair, instead recommending three alternatives:
A ‘Pensions Builder’ to boost employee contributions. Businesses would still donate 3% and the individual would pay 5%, but these amounts would be supplemented by a one-off transfer or part of an annual pay rise into their pension.
A ‘Partnership Pension’ to support smaller employers which would still contribute 3%, but have 1% paid by the government. Employees would also contribute 5%.
A ‘Pension Tax Credit’ where employers would still donate 3%, but receive a tax credit based on 150% of their contribution. The employee would still contribute 5%.
The CBI estimates it would cost £475m a year to implement its proposals.