FSB says 13 million employees relying on right pensions solution

20 May 2006

The Federation of Small Businesses (FSB) today urged all parties to keep the needs of small employers and the self-employed in mind when deciding the future of UK pensions provision.

Small firms employ thirteen million people - 58% of the private sector workforce - and contribute over half of UK GDP. Therefore, an ill-considered decision for small businesses could seriously harm the economy.

The UK’s largest business organisation called on the Government to consider in particular the impact that compulsory employers’ contributions would have on small firms as it prepares to publish its White Paper.

The FSB met the Pensions Minister James Purnell MP to discuss the matter and the key issues covered were:

That individuals should take responsibility for their own pensions. The FSB agrees that the employer may assist if they are able to, but that the fundamental decision to save for retirement should be with the individual.

That compulsory pensions contributions of 3% for employers will have a significant financial impact on many small businesses – any such proposals must address the needs of small businesses and soften the blow for them.

That funds raised by any new scheme must be ring-fenced for pensions and not just put into the Government pot – this would be regarded by firms as another tax on business

That there should be a minimum threshold of at least six months before an employer would need to contribute to an employee pension.
That, as a matter of fairness, the Government must have the courage to tackle public sector pensions to ensure greater consistency between public and private sector pensions.

That the FSB supports restoring the earnings link to the state pension to allow people to support themselves in old age.

Mike Cherry, FSB National Pensions Spokesman, said:

“It is clear to everyone that the time to act on pensions is now. However, the focus must be on the individual to provide for their old age. Asking small businesses to contribute 3% into staff pensions would be a great financial burden for them to bear.

“The Government must recognise this and provide an effective solution to soften the blow for small employers. The costs of compulsory employer contributions could easily outweigh the benefits if small firms are forced out of business – and their staff out of work - by this increased financial contribution.

“We look forward to working with the Government on the proposals in the White Paper to ensure that the economy is not rocked back on its heels by pensions proposals that do not defend the interests of small businesses and their employees equally.”

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