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News - 24 June 2005
David Frost, Director General, BCC

Jobs will go if employers are forced to pay pensions

Ahead of the Pensions Commission’s conference to discuss the future of UK pensions (21st June), a survey by the British Chambers of Commerce (BCC) has found that one in five firms would lay-off staff if they were forced to pay into pensions for their employees. The findings show that it would not be good for businesses, their employees or their customers.

The BCC’s survey of over 800 businesses found that more than one-third of employers would be forced to meet the cost of compulsory contributions by freezing salary increases, while just under a third would have to pass the cost onto customers by raising prices.

Commenting on the survey findings, BCC Director General, Frost, said, “These findings show that forcing employers to contribute towards pensions would come at a high price both for businesses and their employees.

Compelling employers to pay into pension schemes would simply increase the cost of employing someone and it is clear that some firms would be forced to reduce the size of their workforce to meet this cost. At a time when our companies are facing fierce competition from countries such as India and China, compulsory pension contributions are the last thing that UK employers need.”

The BCC’s survey shows that many businesses already find pension provision to be cost prohibitive. More than half of firms that do not offer a pension contribution for their staff say the major reason for this is that they cannot afford to do so, with three-quarters of these companies employing less than 50 people. Mr Frost continued, “When it comes to pensions, cost is a real issue for many firms, particularly small and medium-sized businesses (SMEs). We will continue to press the Government to introduce some form of additional financial incentive to encourage and enable small businesses to provide pension contributions. Indeed, more than half of firms that do not currently offer a contribution say that such a move could persuade them to do so.”

The BCC is calling on the Government to do more to encourage and enable individuals to take greater responsibility for saving towards their retirement. The BCC’s survey found that 55% of schemes that offer an employer contribution of between 5% and 10% have failed to attract more than half of the workforce as members.

In addition, one-third of employers that do not offer a pension contribution say the reason for this is that their employees would prefer other benefits such as higher salaries.

Mr Frost said, “The failure of individuals to save is undoubtedly due to a range of factors. However, we now need to see real measures to encourage more people to pay into pensions. This means better government-led information for employees about the benefits of pension saving, greater use of automatic enrolment in company pension schemes and a simpler state pension system that complements individual saving rather than discourages it.”

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Frost, David

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