Pension plans could lead to employer contribution cuts

Jan 13 2010 by Iain Laing, The Journal

TENS of thousands of employers are set to cut the contributions they make to their workers’ pensions as a result of the Government's new pension reforms, the Liberal Democrats have claimed.

The party said it worked out that 42,000 employers will make reduced contributions under workplace pension reforms announced yesterday.

Liberal Democrat work and pensions spokesman, Steve Webb, said: “Government boasts that its workplace pensions reforms will make everyone better off in retirement are fanciful. How will people be better off if their employers cut the money they put into their pensions? It is now more important than ever that we have a decent state pension that people can fall back on.”

Sarah Green, regional director, CBI North East, said: “The CBI supports moves to encourage more people to save for their retirement.

“The changes announced show that the Government has listened to businesses. We are pleased that firms will face fewer short deadlines and less paperwork than was previously proposed, particularly given the challenging economic conditions. However, discussions are still taking place about how these reforms will affect firms with existing pension schemes. The Government needs to ensure it does not make the system too onerous for companies who are already doing more than the law will require, or it could encourage them to cut contributions to the legal minimum.”

The TUC welcomed the announcement setting out the detailed rules for the operation of auto-enrolment into employer-backed pensions from 2012.

General secretary Brendan Barber said: “This is a major step forward in building a new and progressive pensions system based on the auto-enrolment of workers into pensions and compulsory employer contributions.

“No lobby group will have got everything they wanted today, but all have got a workable and balanced set of rules for the new system.”

John Wright, chairman of the Federation of Small Businesses, said: “We welcome Government moves to help people save for the future in a pension but we are still concerned the new automatic enrolment pension scheme is going to be an administrative headache for small firms and will cost them in both time and money.

“We feel the Government’s efforts to reduce this burden have failed to go far enough. The Government currently estimates that the new pension scheme will cost £350 per business – the FSB considers this is a gross underestimation.

“Although staff will be automatically enrolled into a pension scheme, nothing will be automatic for the small business.

“Small business owners will have to complete forms for the pension’s regulator, employees and the pension scheme, and work to tight deadlines to keep staff informed.”