Employers back pensions compulsion

Dec 10 2004 by Brian Amble Print This Article

As the government's Employer Task Force on Pensions backs the idea of forcing employers to contribute to staff pensions, a new survey suggests that the majority of Britain's manufacturing firms are also sympathetic to compulsion.

A survey of more than 500 manufacturing companies carried out for manufacturers’ organisation that EEF has found that more than two thirds (68 pr cent) of respondents, the vast majority of whom provide occupational pension arrangements for their employees, now support some element of employer pensions compulsion.

This figure is a sharp rise on the half of employers who said they backed compulsory employer contributions in 1998.

Whilst this support has decreased slightly over this period amongst manufacturers with 500 and more employees, it has increased amongst both manufacturers with less than 50 employees and those with between 50 and 499 employees.

Three-quarters of manufacturing employers also support the idea of compulsory pension contributions for employees.

According to the EEF, the fact that these small and medium size manufacturers often face domestic competitive pressures from employers without occupational pension arrangements explains why an increasing number of them now seem to be seeking more of a “level playing field” for employer pension provision.

But David Yeandle, EEF Deputy Director of Employment Policy, said that further compulsion could not be contemplated unless employers saw it as part of a satisfactory long-term solution to future pensions policy.

Nevertheless, according to reports in the Financial Times, the government's Employer Task Force on Pensions will report next week that compulsory pension contributions by employers may be the only way to address Britain's growing pensions crisis because too many employers are not offering decent retirement provision.

The FT says that the Task Force is expected to argue that current incentives to pay contributions are insufficient for many employers and that employers need to see a clear link between offering a good pension scheme and attracting, retaining and motivating staff.

Although the Association of British Insurers has already thrown its weight behind employer compulsion, such a suggestion would set the government on a collision course with the CBI, which vehemently opposes compulsion, as well as small businesses.

The CBI said in October that compulsion could cost business up to £22 billion a year. Firms would see it as "a tax on jobs", while employees might resent being forced to invest in the stock market, it added.

It also pointed put that employer pension contributions have more than doubled in the past seven years, rising from £18bn in 1997 to £37bn in 2003.

And according to the CBI's Director-General, Digby Jones, compulsion would also leave the government a hostage to fortune. "If an individual's fund failed to deliver after compulsion, they might seek compensation from the government who had made them enter a scheme in the first place."