[A-List] UK legitimation crisis: pensions

[Michael Keaney]

Employers support mandatory pensions contributions

Heather Stewart
Friday December 13, 2002
The Guardian

Pressure mounted on the government yesterday to make pension contributions
compulsory for both workers and companies, after the Engineering Employers'
Federation said more than half of manufacturers back the idea.

With the government due to set out its pensions policy in a consultation
paper next week, the EEF said a new survey of its members showed they would
be willing to make mandatory contributions of around 5% - and would also
like to see employees forced to pay into schemes.

As trades unions renewed their call for compulsory contributions to close
the shortfall in retirement funding, the EEF said the falling stock market
and difficult trading conditions meant many of its members had reluctantly
been forced to close down their final salary schemes.

"It's a question of competitive pressures," said Donald Duval, head of
professional practice at Aon Consulting, which helped the EEF compile the
report. "If you are in competitive tendering against someone who doesn't
have a pension scheme, you will always come off worse, because your wage
costs are higher."

Echoing the message from the National Association of Pension Funds survey on
Wednesday, the EEF said the pace of closures was accelerating. Of the firms
surveyed, 55 had shut down their final-salary schemes in the first nine
months of this year, against 66 in the five years to 2000.

David Yeandle, the EEF's deputy director of employment policy, said: "The
government must respond quickly and positively, with action not more words
in next week's pensions green paper, if the threat to the UK's
long-established system of occupational private pension provision is not to
become terminal."

Ministers have expressed concern that employers are using the switch from
final salary to money purchase schemes to cut the level of their
contributions - but forcing them to pay in a set amount is seen as
politically sensitive.

The EEF's call for radical thinking was reinforced yesterday by a coalition
of the TUC, Help the Aged and the Consumers' Association. They called on the
government to phase in compulsory contributions, simplify pensions
regulation, and make it easy for older workers to stay with their employer
after retirement age. "Britain's pensions crisis runs deep, and requires
urgent action," said the TUC's general secretary, John Monks.

Pension consultants Mercer issued a separate "wish list" for next week's
green paper, including the scrapping of the pension credit, which offsets
the state pension against savings, and increasing financial incentives to
pay into a pension. "Everybody knows that the government has lost its way on
pensions," said Deborah Cooper, author of the Mercer report.