Should employers be able to force staff to join pension schemes? Simon Kent reports
Head of corporate personnel, Nationwide
Nationwide agrees that effective action is needed to encourage people to save sufficiently for retirement. We cannot pretend, however, that it will be easy to persuade all employers that it would be in their interests to make scheme membership compulsory, however supportive they may be - in theory - of people making better provision for retirement.
Many employers are already struggling to maintain good quality occupational schemes, and may feel that making all employees join will only increase those costs, which may result in the accelerated closure of schemes.
If compulsory membership is merely an option rather than an obligation for all employers who run occupational schemes, the proposal has much merit.
Many employers will wish to ensure their staff have access to the best pension schemes affordable. But if compulsory membership is introduced alongside other initiatives, such as concurrent membership of other types of savings or pension arrangements, then employers may be able to continue with a slightly less generous form of defined benefit scheme, such as Nationwide's Career Average Revalued Earnings (CARE) plan.
It is often argued that the low-paid cannot afford contributions to an occupational scheme. There is never an easy solution to this problem, but we believe that as long as contributions are deducted from pay at source, pension scheme members can make appropriate personal budget adjustments.
This, of course, was the position prior to the abolition of compulsory schemes in the late 1980s. There cannot be sensible pension provision without some immediate financial strain. To pretend otherwise would be disingenuous.
We will either improve the pensions of our national workforce, or we could pretend it will improve by using terms of encouragement alone. The latter course of action has already proven a failure, with the identification of a huge savings gap.
It would be entirely possible to sweeten the pill for low-paid members by allowing them a higher rate of pension tax relief - such as long-term savings contributions, as opposed to the tax relief allowed on the more readily accessible accounts, such as ISAs.
Divisional director, Rebus