The Employer Task Force on Pensions has warned that urgent action needs to be taken if the UK is to maintain the current voluntary system of occupational pension schemes.
The taskforce was set up by the Government in July 2003 as an employer-led body with union representation to consider how employers can help increase pension provision within a voluntary framework, and to advise the secretary of state on the role of employers in the pensions partnership.
Sir Peter Davis, chairman of the taskforce, said: “The Pensions Commission report demonstrated the huge pensions challenge we face in the UK today and, while employees must take some responsibility for their own pension provision, employers can and should play a major role in helping people save for their retirement.
“We at the Employer Task Force want the current voluntary approach to work and believe employers have an opportunity to build on and improve the current framework in a way that makes sense for business,” he said.
“But make no mistake, we are in a ‘last chance saloon’ for voluntarism, and unless we can reverse the current decline in adequate employer-led pension provision and deliver increased savings from both employers and employees through the voluntary framework, the Government may be forced to look at more drastic solutions.”
The CBI has welcomed the report, saying compulsion is ‘no panacea for the UK’s pension problems’.
CBI deputy director-general, John Cridland, said: “Employers should contribute, when they can afford to do so. Employer contributions have doubled to £37bn since 1997, and are continuing to rise, but we must recognise that not all employers are able to.”
He said that many businesses would see compulsory pension provision as a new tax on jobs.
“Individuals could also resent being forced to invest in a volatile stock market and the loss of choice to make other kinds of investment to pay for retirement,” Cridland said.
The report makes a number of recommendations to employers, employees, unions, the financial services industry and the Government.
– To recognise they have a responsibility to help fund the pensions of their employees
– To aim to achieve over time combined contribution levels of around 10-15%, with employers ideally providing 2/3 if this
– To recognise the importance of maintaining fairness in the shift from Defined Benefit to Defined Contribution (or other) schemes
For the Government:
– To provide a stable, long term framework for UK pensions with clear guidance on who should be saving, and achieve a broad policy consensus on the way ahead
– To provide stability for medium and large employers by maintaining current levels of financial support for pensions
– To tackle the challenge of pension provision among smaller businesses by introducing a new targeted financial incentive to encourage employer contributions.
– To take responsibility for their own pension provision and contribute to their pension schemes
– To recognise employer support for pensions as a key benefit
– To promote awareness of the need to save for retirement among their members
– Encourage their members to join good occupational pension schemes and to make contributions
For the financial services industry:
– To work with Government to review the annuities market
– To provide better service especially to smaller businesses
By Michael Millar
For more on communicating pensions provisions to staff go to: www.personneltoday.com/27104.article