Turner remains steadfast on pension plans

Lord Turner’s third and final report on solving the UK’s pensions crisis was met with mixed responses from employers last week, as he showed little sign of budging from his earlier position.

The Pensions Commission chief said that automatic enrolment of staff into a company scheme was core to the success of the proposed National Pensions Savings Scheme (NPSS). But he admitted that the compulsory employer contributions had been controversial.

Professional services firm Deloitte has suggested that the compulsory contributions could cost employers an extra £2.3bn per year. Turner acknowledged that the financial impact of the proposed contributions – 4% from employee, 1% from tax relief and 3% from the employer – was an issue.

“The cost impact is a concern, but the minimum matching contribution is essential for the architecture of the package we have proposed,” he said.

But the introduction of the NPSS is vital, as it would protect staff from missing out on the opportunity to save for the future, according to Turner.

“The NPSS aims to ensure that employees who do not already have access to low-cost savings through their employers can do so through a national scheme, with the state acting as a bulk buyer of account administration and fund management services,” he added.

The Pensions Commission chief said proposals that people should be automatically enrolled into the NPSS with an opt-out option, and that the scheme could be government run, still stand.

Pensions minister Stephen Timms said the agreed set of proposals would be published in the government’s White Paper in the next few months. But with wrangling continuing between Tony Blair and Gordon Brown over the scheme’s costs, despite a slight softening in the chancellor’s stance, experts are not expecting implementation any time soon.

Feedback from the profession

David Frost, director-general, British Chambers of Commerce

“We welcome the fact that Lord Turner has recognised our concerns by suggesting some form of subsidy. But this will not help those employers that simply cannot afford to pay into schemes. Small firms will be particularly badly hit, and businesses continue to tell us that they would have no option but to reduce salaries and lay off staff.”

Duncan Brown, assistant director-general, Chartered Institute of Personnel and Development

“We cannot leave everything to the government. Employers must continue where possible to provide pensions as these are one of the few tax-effective ways of delivering rewards to employees, and are increasingly being valued and appreciated by them.”

John Hannett, general secretary, Usdaw

“We disagree that pension contributions will cost jobs, as we can see no real evidence that small businesses go under because of these costs. Lord Turner has wisely indicated that small business should get help if they face difficulties, but the principle that all employers have a duty to make sure their staff have decent pensions is very welcome.”

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