The proportion of people in work relative to those that are retired is gradually decreasing. This demographic trend will place a considerable strain on the UK's state pension system in future years. As a result, it is increasingly important for people to make private provision for their retirement and employers have a crucial role to play in helping more employees to save. However, research published recently by the Government's Pensions Commission showed that as many as nine million people could be under-saving for their retirement.

Background

The Pensions Commission was established in December 2002 to address the above challenges. It was asked to review the operation of the UK pensions system and make recommendations for reform in November 2005. On the 25th of May 2006 the Government published its response to the UK's long-term pensions challenge. The White Paper 'Security in retirement: towards a new pensions system' aimed to encourage more people to plan and save for their retirement. Having assessed the recommendations of the Pensions Commission, the government proposed the following:

• Introduction of a low-cost personal account to give those without access to occupational pension schemes the opportunity to save. People will be automatically enrolled into either their employer’s scheme or a new personal account, with the freedom to opt out. Employers would have to make minimum matching contributions.
  

BCC Position

• The BCC in principle supports the broad aims and objectives of the White Paper in tackling the problems identified. In particular we support the concept of a higher state pension, with less reliance on means testing and an increase in the state pension age to reflect rising longevity. It is important to realise that many small businesses - the engine of the economy - will face significant costs if the proposals go through as outlined in the White Paper;
• The pension’s White Paper proposed the introduction of Personal Accounts in 2012. New low cost savings scheme in which employees will be automatically enrolled are planned - employers will make matching contributions while the employee chooses to remain in the scheme. The employers represented by chambers are the main organisations affected - they will need to be provided with support, in the areas of education, processes, and systems. The BCC wants the Government to set aside budgets to enable industry and employer groups to deliver these items;
• For smaller businesses the costs associated with the changes will fall disproportionately on them.  The BCC want the Government to provide financial support for both the initial establishment and for ongoing administration of Personal Accounts. Furthermore there must be a guarantee that the 3% employer contribution will not rise in the future;
• Our members are also very concerned about the cost impact of the Personal Accounts on businesses, and on small firms in particular. The BCC’s 2005 pensions' survey found that 74% of small employers that do not currently provide a contribution say the reason for this is that it is cost-prohibitive.
  

For further information, please contact: -

Narinder Gill
Senior Policy Adviser
n.gill@britishchambers.org.uk
Direct Line: 020 7654 5811
Mobile: 07843 258 520