CBI warns employer compulsion is wrong answer

The CBI today has unveiled proposals to help tackle the UK's emerging pensions crisis without compelling business to contribute to staff pension schemes.

The employers' organisation argued, in its submission to the Government, that enrolment without compulsion is the best way of increasing pensions saving without undermining existing provision.

The CBI recommends a Pension Builder style plan to boost employee pension contributions, combined with additional support for smaller businesses under which government matches employer contributions or offers Pension Tax Credit.

The CBI argues that forcing companies into compulsory pensions contributions would put smaller hard-pressed firms under huge economic pressure and significantly raise labour costs while failing to boost savings levels overall.

John Cridland, Deputy Director-General of the CBI, said: "The CBI wants as many individuals and companies as possible in pension schemes and automatic enrolment is the best way to achieve this; it will overcome the existing inertia about pension provision among employers and employees alike.

"But forcing employers to contribute is neither fair, nor equitable or sensible. As the Pensions Commission says, it is not right to tell a 21-year-old striving to pay off his student debts, or saving for a deposit for a flat, that he must first save for his pension."

Mr Cridland questioned why small companies should be forced to pay into a pension scheme if this could force them out of business or prevent the creation of new jobs.

"The CBI believes there must be an equal right to opt out for both business and employee so individual economic realities can be taken into account. Our proposals are therefore designed to cajole employers, not compel them, into voluntarily contributing to an employee pension saving scheme," he said.

The CBI has proposed a Pension Builder scheme which would see employees divert a percentage of their annual pay rise from their gross salary into their pension scheme but still enjoy increased take-home pay.

Under the CBI's proposal, employers choosing to opt in to a Pension Builder would still contribute 3% of an employee's earnings and the individual would pay 5% - some of which would be salary contribution and tax relief, supplemented by a one-off transfer of part of an annual pay rise into their pension.

(SP)