Concerns over wider impact of Pensions Commission announcement

The government has announced plans to revive the Pensions Commission, but there are concerns about how this might impact businesses.

According to figures, almost half of working-age adults aren’t saving. Low earners, some ethnic minorities and the self-employed are the least likely to be putting money aside for their pension pot.

New analysis shows that if there are no changes put in place, the incomes of retirees are set to fall over the next few decades. For example:

• Retirees in 2050 are on course for £800 or 8% less private pension income than those retiring today.
• 4-in-10 or nearly 15 million people are under-saving for retirement.

Work and Pensions Secretary Liz Kendall, commented, “People deserve to know that they will have a decent income in retirement – with all the security, dignity and freedom that brings. But the truth is, that is not the reality facing many people, especially if you’re low paid, or self-employed.

“The Pensions Commission laid the groundwork, and now, two decades later, we are reviving it to tackle the barriers that stop too many saving in the first place.”

The Recruitment and Employment Confederation (REC), however, has raised concerns, saying, ‘change is not free’.

Neil Carberry, REC Chief Executive, explained, “There is no doubt that sustainable pension saving matters, and one of the great successes of the last 20 years is the consensus-based introduction of automatic enrolment and employer contributions from 2012.

“But that change wasn’t free – businesses have stepped up to pay more in partnership with their employees. Any review to this settlement needs to be done with business – not to them. The jury is out on whether we can repeat the good work of the Turner Commission, which was based on deep partnership with business that made it successful.

“We are particularly concerned at the wider impact of this announcement. Employment costs in the UK have been rising, and we must be a competitive and attractive place to create jobs.

“With technology reshaping our labour market, a huge raid on employers in the form of National Insurance rises this April, pay driven up by minimum wage rises of a quarter in three years, and the threat of a hugely bureaucratic approach to employment rights in the form of the Government’s current Bill, firms are already deeply concerned.

“If the government wants to drive up business investment and thereby economic growth, firms need the capital to do that. Many business leaders will see this as another potential increase in costs – to be successful, the Commission and the DWP will need to ease those fears by moving slowly, working with business and remembering that the success of automatic enrolment is in the support it generated from employers across the country.”

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