Employers come round to idea of pensions contribution compulsion

Employers are no longer united in their opposition to businesses being forced to pay into company pension funds.

The EEF manufacturers’ organisation has published a report advocating compulsory pension payments – despite warnings from other employers’ groups that this could lead to reduced salaries and redundancies.

Its report, Rethinking Pensions: Preparing for an Ageing Society, called for “a modest compulsory contribution” from all employees and employers.

The Pensions Commission called the report a “comprehensive contribution” to the debate.

TUC general secretary Brendan Barber said the EEF had recognised that “with the many rights that businesses enjoy come responsibilities”.

The EEF report said contributions should initially be set at 2% of all earnings and then gradually be increased to 4% of all earnings between 2015 and 2025 – with contributions payable by both employees and employers.

Under the EEF proposals, employers would be encouraged to make extra voluntary contributions as well. These would be collected by the government through the National Insurance system.

The strategy is also based on enhancing the basic state pension and less regulation of any additional voluntary occupational and private pension provisions.

EEF president Alan Wood said this “three-pillar” approach was fully costed by the Pensions Policy Institute and set out a constructive and realistic solution to the UK’s pensions crisis.

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But Stephen Hill, pensions policy adviser at the British Chamber of Commerce (BCC), strongly disagreed with the EEF’s conclusions. He said that recent BCC research showed one third of employers believed compulsory pensions would force them to freeze salaries, while one in five would be forced to cut jobs.

Susan Anderson, CBI director of HR, said: “While we see the attractiveness of this solution to engineering firms which already contribute to employee pensions, most smaller firms simply could not afford to take such an approach.”