Calls for compulsory pension contributions
There should be compulsory contributions for pensions and a substantial rise in the basic state pension, an employers’ group has said.
The Engineering Employers Federation (EEF) made the call for a radical overhaul of the pensions system in a submission to the government’s commission on the future of pensions.
The “three-pillar” plan would involve: an enhanced basic state pension, minimum compulsory contributions by employers and employees, and a reduction in regulation.
EEF president Alan Wood said that putting a “sticking plaster” on the current pensions system was no longer an option.
“We now need a frank and open debate so that all parties understand the various options for addressing this important issue as we seek to build a consensus on the way forward,” he said.
The TUC welcomed the report, with general secretary Brendan Barber describing it as “hugely significant”.
“For the first time an important employer organisation has broken ranks and come out as a supporter of pensions compulsion. No longer can other employer organisations pretend that business is united,” he said.
The first tier of the plan would see the basic state pension and pension credit replaced by an enhanced scheme, providing an income of a fifth of average earnings at 65, with a rise to a quarter of average earnings by 75.
Under the second tier, compulsory saving would be introduced in the workplace, albeit at two per cent a year of salary in 2015.
Those on less than 25 per cent of average earnings would have two per cent paid by the government, the authors said, a contribution that would increase gradually to four per cent by 2025.
Compulsory saving would be collected via the national insurance system.
In terms of a third tier of pensions, the more well-off could boost pension plans through additional private schemes.
The EEF, which represents 6,000 manufacturing firms, also said private sector firms need not suffer from burdensome regulation.
Adair Turner, head of the government’s Pensions Commission, is to publish his report on the current state of the pensions industry on November 30th.
The Pensions Commission has estimated that 11.3 million workers are currently not making any contributions to occupational pension schemes, and that 12.1 million over-25s are not saving enough for their retirement.
