IoD Baulks at Pensions Compulsion

30 November 2005

Compulsory employer pensions contributions are not the answer to the UK's pensions crisis, business leaders warned today. Commenting on the Second Report of the Pension Commission, the Institute of Directors (IoD) said that whilst many of the recommendations were in-line with its own proposals for pension reform, one big difference remained.

The IoD parted company with Lord Turner on compulsion for employers. Miles Templeman, Director General of the IoD, said:

"The Second Report is the most comprehensive analysis of the UK pension system ever undertaken. But we do not want the Government to accept its recommendations on employer compulsion. The burden of pensions on employers is already high enough."

Specifically, the IoD said:

• It was unhappy with the Commission's proposals on compulsion. It opposes compulsion on employers because it will increase labour costs and act like a tax on employment.
• It  welcomed the acknowledgement that a single unified state pension has the merit of huge simplicity. We will carefully consider the Commission's arguments as to why there shouldn't be a rapid transition towards a single unified state pension. At present we are not convinced that the Commission's gradual evolutionary approach, building on the present two tier system, is the best way forward.
• It welcomed the indexation of the basic state pension by earnings.
• It welcomed the acknowledgement that there needs to be an increase in the state pension age to 68. We hope there is the political will to implement such a change.

Miles Templeman, said:

"The country is indebted to the work of Lord Turner and the Pensions Commission. Such an impressive piece of work requires detailed examination and we will be responding as a matter of urgency early in the New Year."