UK- The Confederation of British Industry has called the Trades Union Congress’ (TUC) proposals for compulsory employer pension contributions “unrealistic”, in spite of a survey conducted by the CBI and Mercer which shows out of 940 firms, 24% have closed their final salary pension schemes and 12% are contemplating doing so.
The statement comes as the TUC holds its annual congress in Blackpool at which unions intend to push the government for a solution to the UK pensions crisis. In the opening address on pensions, deputy director general Brendan Barber again reiterated the TUC’s stance on compulsory employer contributions.
“Employers must provide a pensions contribution for every employee. Of course, it will need to be phased in – as a similar scheme was in Australia. But pay up they must. Where there is a decent pension scheme, we say that employers should once again be able to make membership of a quality pension scheme to which they contribute a condition of employment,” he said.
Recent threats of strike action by unions were also discussed in Barber’s address. “Falling employer contributions and the closure for final salary schemes are the most serious real cuts in pay and conditions since the second World War. No wonder we’ve already seen strike action. I don’t doubt we will see more.”
The address follows calls on Sunday from three of the UK’s biggest unions, the TGWU, the GMB and Unison, for universal pensions contributions. The TUC‘s suggestions, however, that employers should contribute as much as 10% of employee’s earnings have been criticised by the CBI and National Association for Pension Funds.
“For smaller firms a 10% increase in labour costs would have a severe impact”, says CBI deputy director-general, John Cridland. “It would make them reluctant to employ more people and could threaten the viability of many smaller companies.”
NAPF Chief Executive, Christine Farnish agrees: “if a firm goes bust in the attempt to retain a final salary pension scheme, everyone loses out.”
Sectors worst hit would be those such as IT and hospitality where occupational pensions are rarer and where employees traditionally prefer to maximise take-home pay rather than receive benefits.
Furthermore, points out Cridland, smaller companies do not believe they have the expertise or skills to recommend a pension scheme to their employers.
“The TUC’s proposal would only exacerbate the real problem, which is the falling value of the stock market. Unions must stop playing the blame game if they want to generate constructive proposals,” he says
Farnish, said: “industrial confrontation could be averted if both sides considered the full range of options. These could ease the mounting cost burden on employers, whilst retaining valuable pension benefits for their staff.”
Suggestions include: changing a final salary scheme’s accrual rate for future benefits; modifying some of the additional benefits available to pension scheme members, such as sickness or health benefits, or discretionary early retirement terms; negotiating an increase in employees’ contributions to the scheme; or switching from a scheme based on final salary to one based on career average salary.
The CBI also feels a reform is necessary. “There is clearly a need for a national debate on pensions. The government must act on proposals to simplify and reduce the cost of occupational provision and we believe more must be done to educate people of the importance of starting to save early in their working lives,” says Cridland.