Employers will need to cut pay rises from next year in order to fund plans to automatically enrol the entire workforce in a workplace pension scheme, the head of NEST has warned.
Tim Jones, chief executive of the Government’s new pension offering, the National Employment Savings Trust, told the Telegraph that the proposed changes would lead to a “redistribution” of staff wages.
“There’s no new money in the world. Businesses will absorb the extra costs and some of that will be in some people getting lower pay rises than they otherwise would have got,” he said.
From October 2012, large employers will be required to automatically enrol all staff aged 22 or more into a workplace pension scheme and pay contributions of 3% of individuals’ salaries into it (staff will pay 4% and tax relief will account for a further 1%, bringing the total to 8%). Small businesses will be expected to follow suit two years later.
The move is intended to ensure that the nine million workers who are currently contributing nothing towards an occupational pension have adequate provision for their retirement.
“Millions of people are sleepwalking into a very bad place in retirement. The social need for [change] is as big as it ever was. There are very significant benefits accrued from maintaining momentum on reform. Interrupt it at your peril,” Jones said.
Nonetheless, he suspected that the number of employees exercising their legal right to drop out of auto-enrolment could be as much as 30%. Just under 100 employers have currently signed up to NEST, including F2 Chemicals, Metal Assemblies and Positive Support, a charity that aims to help adults with learning disabilities.
Motion of support
In news elsewhere, Bolton Council has set in motion plans to become one of the first local authorities in the UK to publicly back its workforce in a national dispute over pensions.
According to the This is Lancashire portal, Bernadette Gallagher, local branch secretary of trade union Unison, has welcomed an announcement by the Council’s leader, Councillor Cliff Morris, that he wants the authority to support a campaign to defend existing benefits.
While he insisted that he was not endorsing industrial action, Morris said that he would not condemn workers if they decided to strike. He is to propose a motion to this end at a Council meeting on Wednesday.
The motion includes the statement: “The Council is disappointed that the Government has failed to negotiate fully and openly with the trade unions and regrets that the Government’s position has increased the possibility of industrial action.”
It continues: “Bolton Council resolves to ask the Leader to write to the Chief Secretary to the Treasury within the next month to express Bolton Council’s concerns and urge the Government to rethink their proposals.”
The motion also highlights the worry that between 40% and 50% of existing pension scheme members could opt out if proposed increases to contributions go ahead. Unison, among other unions, is currently consulting with its members over whether to take national strike action over the issue in November.
