Businesses warn government not to tinker with pensions
Companies crave stability on tax, policy and funding to boost pensions according to the latest survey of business leaders by the CBI and Mercer.
Almost eight out of ten respondents are against further changes in pension taxation, while the majority cited certainty as the Government’s top pension priority in this Parliament, as recent substantial reforms bed in.
The biennial survey also found costs of running defined benefit schemes still command board-level attention, with company chiefs keen to avoid increasing costs from future European policy changes.
The percentage of respondents identifying the need to make auto-enrolment administration easier leaped to nearly 70% compared with just 41% in 2013. Two thirds also cited changing regulation adding to the compliance burden. And the vast majority indicated that increasing take-up levels among employees for existing schemes must be a priority, rather than raising minimum contributions.
More than 160 businesses responded to the survey, including FTSE 100 companies and SMEs, together employing more than 500,000 employees, with a combined market capitalisation of £237bn. The survey is unique as it collects data from both the boardroom and pensions’ experts in respondent companies.
Neil Carberry, CBI Director of Employment and Skills, said: “Recent regulatory changes, coupled with auto-enrolment and state pension reform, mean UK business leaders now crave stability.
“Businesses want to focus on ensuring employees are making the most of what’s on offer, but there is clear concern about regulatory changes eroding incentives to save, which must be avoided at all costs.”
Fiona Dunsire, Mercer CEO, said: “We support the need for stability. The focus now should be on enabling business to address the challenges of an ageing workforce and the urgent need to save more for retirement.”
On the need for the current pensions tax relief framework to be preserved, the survey shows:
- 79% say reviewing pensions tax relief should not be a priority for government
- Nearly half of respondents (46%) say some employees could cease saving into pensions if a change occurs.
Neil Carberry, CBI Director of Employment and Skills, said: “Businesses are clear that the current framework of pensions tax relief at the point of saving – while complex – is the best for encouraging pension saving.
“Losing this would remove company incentives, as employer-provided pensions are the only way to deliver low-cost saving at substantial scale at levels above automatic enrolment rules. A change would cause damage to the fiscal position too in the long-term.”
Fiona Dunsire said: “It is vital he UK’s approach to pension tax relief remains unchanged as it is important to avoid imposing unnecessary cost on businesses. Our clients are still dealing with the introduction of pension freedom and auto-enrolment as well as preparing for the end of contracting out so there is little appetite for further reforms.”