David Yeandle, deputy director of employment policy at the EEF: The comprehensive and integrated package of reforms that the government is currently implementing is a once-in-a-generation opportunity to reform the UK’s pension system. Over the last few years, broad support for this package has been achieved across the political spectrum and among key stakeholders. It is now very important for the successful implementation of this package for this broad consensus to be maintained.
A key element of the government’s reform package is the introduction of personal accounts, a new low-cost savings vehicle that will enable individuals without access to an occupational pension scheme to save for their retirement. Auto-enrolment into personal accounts with a modest level of compulsory employer contributions for those who decide not to opt out is critically important for their success. However, it will also be vital for personal accounts to be simple for employers to administer and individuals to understand.
Compulsory employer contributions are clearly a controversial part of the government’s package of reforms to the UK’s pensions system, particularly among smaller firms. While their concerns will be eased by the decision to phase in the implementation of personal accounts over three years and to have the level of compulsory employer contributions set out in primary legislation, the government needs to go further.
It should also provide some initial financial support for smaller employers when personal accounts are introduced. This must be meaningful and workable but it must also not disadvantage employees in smaller firms, many of whom are in the government’s target group for personal accounts.
Providing this initial financial assistance would help smaller employers to meet the additional costs that many of them will face for the first time in contributing to and administering personal accounts on behalf of their employees. It would also help to create an environment in which smaller employers are more supportive of personal accounts, an important requirement for their successful implementation.
David Yeandle is deputy director of employment policy at EEF, the industry body for engineering employer