Most employers forced to join the proposed National Pensions Saving Scheme (NPSS) will need financial aid from the government to kick-start the project, according to a leading business group.
A government-run NPSS was one of the Pensions Commission’s key proposals for addressing the UK’s pensions deficit. Under the plans, employers that do not offer an occupational pension scheme would contribute the equivalent of 3% of an employee’s wages, while the worker contributes 5% (1% being National Insurance relief).
Business groups have complained that the compulsory payments element of the scheme would cripple some companies financially.
Last week, manufacturers’ body the EEF, the only employers’ group that supported compulsion, conceded that for companies with fewer than 50 employees – 95% of UK businesses – it could be necessary to fund their initial payments to “kick-start the project”.
David Yeandle, deputy director of employment policy at the EEF, said using taxpayers’ money would demonstrate government willing to smaller employers.
“To get greater engagement among firms, it is vital that the chancellor finds the mechanism to offer financial support,” he said. “It will be money well spent and will not be big bucks as far as the chancellor is concerned.”
This option has the benefit of relative simplicity, although the EEF had yet to identify the best mechanism for making these lump-sum payments, Yeandle added.
Last week, the future of pensions savings was debated in the House of Lords.
Peers, speaking to an almost empty House of Lords, warned of widespread public ignorance, a culture of relying on the state and a general lack of trust in pensions. Liberal Democrat, Lord Oakeshott of Seagrove Bay, said: “It’s vital we don’t underestimate the total collapse of public confidence [in pension schemes].”