In defence of compulsory pension contributions

The EEF is the only employers’ body to welcome measures that would force companies to pay into a retirement fund for staff.

Its deputy director, David Yeandle, explained why: “We support the broad framework of the structure in the commission’s report. That is, a higher basic state pension and a modest level of ‘soft compulsion’ for employers and employees through auto-enrolment in a new National Pensions Saving Scheme (NPSS).

“But there will need to be a phased implementation [of auto-enrolment] so that employers and employees can adjust to this new environment,” he said.

“The potential difficulties that some smaller companies may face will also need to be addressed by the government initially providing financial incentives to help offset additional costs.

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“The impact of levelling down [where employers abandon good schemes to adopt the statutory minimum] will be limited. The government needs to offer people education in financial awareness, as having educated employees will put pressure on the labour market which is already tight. If they want to be seen as an employer of choice, companies will not default [on their pensions promises].

“The NPSS could benefit employers. The commission made clear that companies can put an extra 8% into the scheme and a lot of companies have said to us they will do this as they want to get out of the business of managing pensions.”