The CBI has launched a major bid to tackle the pensions crisis with key proposals including better employer schemes, a higher state pension and an increased retirement age.

In a move to develop sustainable pensions provision the business group is launching a 22-point action plan aimed at companies, individuals and the government.

Ministers are warned that they must do more to tackle the "seriousness of the emerging pensions crisis".

Chaired by Unilever UK chairman Richard Greenhalgh, the CBI group calls for employers and individuals to put more money in into pensions.

"All employers who can afford to contribute to pensions should do so when their employees also contribute and employers should automatically opt new employees in to pension schemes after any waiting time has been completed," said the report.

Incentives

To boost savings the government should increase incentives for firms and their employees, particularly small and medium-size enterprises and people on low earnings.

The CBI says the government must reduce regulatory and cost burdens on schemes.

An increase of the basic state pension to the level of the Pensions Credit would reduce the need for means testing, said the study.

Ministers are also warned that they should retain the earnings-related second state pension.

"To help fund this the state pension age should gradually rise to 70 over the decade from 2020 to 2030," adds the report.

Commitment

Commenting on the report Richard Greenhalgh says: "Overwhelmingly employers remain committed to pensions and have responded as well as they are able to, given the difficult circumstances that have confronted them.

"Few people appreciate the extreme pressure companies have been under - businesses will have to make £6 billion worth of additional pension payments in each of the next three years.

"Employers are not the villains of the piece. Private provision has been tested to the limit by falling returns on investments, tax regime changes and longer life expectancy.

"This has been hugely damaging to companies' ability to invest and that's bad for shareholders, employees and the UK economy as a whole."

The report rejects TUC calls for compulsion for employers and employees to contribute to pensions schemes.

Union response

But the TUC has given a mixed welcome to the CBI's proposals.

"The CBI's recognition of the depth of the pensions crisis can only add to the pressure on the government and the Pensions Commission to adopt radical proposals to plug the savings gap. To that extent we welcome this report, but many of its policy prescriptions are wide of the mark," said Brendan Barber.

"Employees in particular will be angry that their employers are suggesting they should work until they are 70 before they get a state pension, especially as the CBI are lobbying hard for 65 as the age at which employers can force people to retire.

"Their continued sniping at public sector pensions is also unattractive. Pensions are part of the whole remuneration package and should be judged as such."