The Employer Task Force on Pensions today presented its report into occupational pension schemes, and warned that Britain is now in the “last chance saloon” of voluntary pensions contributions.

Tackling the neglected subject of small business and pensions schemes, the report has said that it is introducing ” a new targeted financial incentive to encourage employer contributions.”

The report found that only half of the number of companies employing less that 100 people contribute to pensions schemes, compared to one-tenth of companies employing between 100-249 people.

It found that, typically, within small businesses,

• “Employees currently show little or no understanding of pensions and demonstrate little demand for them”, and that as a consequence, smaller business employers see little incentive to provide a good pension. Understanding of the tax benefits of pension savings is particularly poor.
• There is low confidence in the pensions industry, and in the absence of this being restored, “initiatives on increasing awareness will be wasted.”
• Portability of pensions, and understanding that they are portable, is key and will also be important in restoring confidence in pensions.
• The increasing regulatory burden on small businesses was also criticised, with pensions seen as “only one of many areas where small businesses are facing increased regulation.”
• Smaller businesses need additional incentives to participate in pensions more actively.
• Cross-party agreement should be secured on national pensions policy, “as developing effective policy responses requires working to much longer timescales than election cycles.”
• Multi-employer schemes received a lukewarm reception, with many employers disliking the idea of giving up control of their pension arrangements.

The Task Force declared that “action is required on two fronts” to achieve a step-change in employer pension provision: first, an awareness campaign needs to be initiated amongst business, and second, the government must consider introducing financial incentives to employers to encourage them to contribute.

The report acknowledges that small businesses face barriers when it comes to pensions provision, including the lack of dedicated human resources personnel, and that their small size makes them less attractive for independent financial advisers (IFAs) to run information sessions.

It notes that while it is obligatory for employers to provide access to a stakeholder pension unless it offers an occupational scheme, employs less than five people, or offers a Group Personal Pension with an employer contribution of at least 3%; but that there is no requirement or incentive for employers to contribute to the schemes they establish – as a result, only 17% of employers actually do.

The report was set up by the Government last year, to look specifically at the role private savings can and should play in averting what is near-universally considered to be a looming pensions crisis.

It says that increasingly, there is some consensus that compulsion may be the only workable solution, but that the Task Force itself “wants the current voluntary approach to work”, although it, says, this is the “last chance saloon for voluntarism” and without a reversal in the decline in employer-led pension provision, “the Government will be forced to look at more drastic solutions.”

The full report can be found at: www.employerstaskforce.org.uk