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Mercers comes out against compulsory contributions

UK- Mercer Human Resource Consulting has come out against recent calls to make occupational pensions contributions compulsory claiming it is an inappropriate approach to solving the current problems in UK pension provision.

Instead Mercers is advocating increasing the state benefit to provide £140 a week, a figure it believes would mean the lower paid would have little need to save nor employers to contribute.

Mercer’s view runs counter to the line taken by the TUC, the body representing more than seven million employers in the UK, which is pressing the government to introduce compulsory contributions.

TUC research published last month shows half the UK workforce is without access to an occupational pension scheme. At the time of publication, TUC deputy general secretary Brendan Barber said they wanted the government to force employers to contribute to occupational schemes.

Mercers has denounced such an approach. Says European partner Matthew Demwell: "the TUC’s proposals do nothing to help the self-employed or the unemployed, but providing a decent basic pension for all would. Above this level, employers should be able to contribute to private pensions on a voluntary basis, providing a second pillar of savings that is earnings-related.

"Compulsion is not the answer. Whatever the minimum contribution may be, it will not be enough for some. For others, the trade off would be a wage cut, with the net effect being too much saving and not enough income while at work. It’s a denial of market forces.”

Mercers claims that compulsion could at worse harm the competitiveness of British industry and it is urging the government to increase incentives such as tax relief and reduce red tape if it wants to encourage investment in pensions.

Says Demwell: "once contributions are compulsory, there would be nothing to stop the government from removing even the existing, limited tax relief on pensions.”

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