FSB calls for rethink on National Pensions Day

18 March 2006

As the Government marks its National Pensions Day today (March 18 2006) the Federation of Small Businesses (FSB) called for the Government to rethink key parts of its pensions proposals.

Mike Cherry, FSB National Pensions Spokesman, said:

“We are pleased that the Government has finally begun the process to find a long term solution to the pensions situation in the UK. It is not before time.

“However, there are several nettles that the Government still needs to grasp. There has to be some courage to confront the public sector unions to ensure that everyone retires at the same age. Public sector workers should not be able to retire on our tax contributions several years earlier than private sector workers.

“In addition, small businesses, despite making up over 99% of all firms and contributing over 50% of UK GDP, are being forgotten in this debate. Requiring compulsory contributions from businesses will hit small firms disproportionately and will be seen as another tax on them. The Government needs to recognise this and soften the blow on small businesses or risk severely damaging this vital sector of the economy.”

Specifically the FSB wants to see:

• An equalisation in the retirement age in both the public and private sectors. Public sector workers can no longer be allowed to retire at 60 while the Government is suggesting pushing the private sector retirement age to 67 and beyond. Private sector workers would be expected to continue funding their own pensions as well as those of the public sector, which cannot be considered fair whilst this inequality continues.
• More focus on small businesses in the Government’s proposals. The current discussion on small companies revolves around companies with 250 or more staff. Small businesses employ 0-49 people and the challenges they face are being ignored in the current debate. Compulsory pensions contributions from small firms would simply be seen as an additional 3% tax on them. This is unsustainable.
• A greater emphasis on the individual over the employer. The pension is to safeguard the retirement of the employee and the Government should encourage the individual to take more responsibility for their own future. Equally young people should be encouraged as soon as they enter employment to save for their own retirement.
• The money paid in to the pensions pot must be ring-fenced for pensions, not simply used as general taxation as National Insurance contributions have become.
• Tax relief should be introduced on money earned from the sale of a business. Many small business owners have only their business as a way of saving for retirement with the intention to sell their business and use the proceeds to fund their retirement. This needs to be recognised by the tax system. Given that the sector has been identified as not saving enough for retirement this tax relief would help to acknowledge the particular problems they face in providing for their retirement.

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