The UK's employers federation has expressed strong reservations about the use of compulsory company payments in any reform aimed at extending funded pensions coverage.

The Confederation of British Industry (CBI) wants to see the replacement of the State Earnings Related Pension Scheme (SERPS) with national funded pensions schemes but believes that compulsory employers contributions would increase labour costs.

These costs would be in addition to costs incurred due to the expected introduction of a national minimum wage. The CBI argues that small and medium sized firms in particular could see their competitiveness damaged with resulting job losses.

The Confederation would like to see the set up of several competing defined contribution schemes operating along the same lines of occupational schemes although complementary to them. These, it argues, would encourage increased savings for retirement, since people would feel that their money was earmarked in a fund. The scheme, the organisation says, would meet the needs of a more flexible workforce and would be particularly attractive to small and medium sized companies that cannot afford to set up their own group schemes. The organisation also wants to see the retention of the inflation-linked state pension, but would like additional means-tested help given to the less well off.