Employers are ready to abandon their pension schemes and pour the money into the government’s proposed personal account system, MPs were told last week.
However, they will not do so if a £3,000 annual cap is put on contributions, manufacturers’ organisation the EEF told the Work and Pensions Select Committee.
Last week, the committee finished listening to evidence and will now prepare a report on the personal accounts system, which was proposed in the Pensions Bill last December.
David Yeandle, EEF deputy director of employment policy, told the committee that businesses were ready to replace their pension schemes with personal account contributions.
“Quite a lot of our members who have expressed interest in this will say: ‘We are not necessarily wanting to reduce the amount of money we pay into our employees’ pensions, but we do not want all the hassle that goes with it, and actually what we would like to do is use the personal accounts as that mechanism’,” he said.
But he added that a limit on the amount that could be paid into the personal accounts would discourage employees, as they could not supplement their contributions with lump-sum payments.
Yeandle told Personnel Today that the cap would, therefore, render the scheme useless to employers, and was only being called for by the private pension industry because “they want the money to go into their schemes”.
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