UK Industry Group Knocks Pension Reform Proposals

September 26, 2006 ( - The leader of a British employer organization has warned that the proposed pension reform in the UK could prove difficult for small business to adopt.

According to, the director-general of the Confederation for British Industry (CBI) Richard Lambert was referring to proposed changes to the UK pension scheme, which favor automatic enrollment (See UK Pension Paper Said to Favor Auto Enrollment ) and compulsory company contributions. According to the Web site, Lambert claims that the increased burden on employers to fund pensions could actually negate efforts at pension savings.

Lambert instead urged the Secretary of State for Work and Pensions John Hutton to help small firms without pension plans and employers with existing arrangements, to ensure costs do not get out of hand.

The CBI’s proposed changes to the pension reform proposal include:

  • Phasing in compulsory employer contributions over three years, rather than a fixed 3% of employees’ salaries.
  • Financial support to help employers with fewer than 50 employees through reduced compulsory contributions – 2% of employees’ salary instead of 3%.
  • A six-month waiting period before employees are automatically enrolled.
  • Deregulating and simplifying occupational pension rules so firms are encouraged to continue offering their own pension plans.
  • Considering incentives for employers who offer top quality plans.
  • Making employees, not firms, responsible for choosing their pension provider unless employers want the responsibility.

The UK government issued its 212-page pension reform proposal in May (See  UK Issues Formal Pension Reform Proposal ), taking into account the recommendations of the government panel led by Adair Turner (See Turner Commission Calls for UK Pension Changes ). The Turner Commission report included suggestions on both automatic enrollment and fixed contributions.

The idea of auto enrollment drew criticism early on in the UK from companies claiming it will drive their costs up and make them less competitive (See  UK Pension Commission Proposal Suffers Another Attack).