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Planned pension reforms – a ticking time-bomb?
The Government’s plans for tackling the retirement needs of the UK’s rapidly ageing workforce could lead to redundancies according to business leaders at the latest Wilkins Kennedy Round Table event.
While there was consensus on the need to address the estimated 12 million workers currently not saving sufficiently for their retirement, the timing of the plans for compulsory pension contributions is questionable.
All delegates agreed that the proposals may result in employers needing to reduce spend – resource often being employers biggest outgoing. The plans see big companies enrolling the vast majority of staff on schemes from April 2012, followed gradually by smaller companies between 2013 and 2016. Business pension contributions would amount to significant sums, which could tip some firms over the edge, particularly those like care homes where salaries represent their biggest overhead.
From the employee perspective, pension contributions could feel like wage cuts and may be hard to stomach for many that have not seen a pay rise for years. The chance for employees to opt out of the scheme also sparked fierce debate. While legislation prevents companies coercing people into opting out, would the government be able to stop businesses promising pay increases for staff who do?
With forecasts suggesting that by 2050 the number of people in retirement would be greatly increased, delegates were unanimous that some kind of pension reform was urgently needed. Most delegates agreed they would implement the Government’s measures, if they were ‘Chancellor for the Day’, but the feeling, however, was that more could be done to make it easier on both employers and employees.
Several suggested it might be better if the proposals were delayed for between three to five years to allow for the economy to recover. That the economy simply wasn’t ready for such drastic measures was the common opinion round the table. It was described as boom time thinking in a bust economy.
Others suggested making pension provisions more flexible, with automatic enrolment just one of a suite of pension options which include alternatives for the over 55s who had little benefit in the Government scheme.
As one delegate asked, why is the Bank of England now tipping £75 billion worth of quantitative easing into the economy, while implementing the pension reforms was effectively ‘quantitative squeezing’?
- Gareth Lewis, Polymedia PR
- John Natt, Wilkins Kennedy
- Samantha Batten, WK Business Solutions
- Dorian Lawrence, LSC Fascades
- David Bickford, Penningtons Solicitors LLP
- Katherine Maxwell, Moore Blatch
- Mark Moores, Clydesdale Estates
- Nigel Featherstone, Aon Risk Solutions
- Jane Bond-Webster, Santander
For details of the next Round Table or to attend, contact Claire Peers on firstname.lastname@example.org