UK Union Battles Pension Qualifying Period Proposal

August 31, 2006 ( - A British labor union has come out against a UK business community proposal that would impose a one-year qualifying period before workers can join a national retirement savings plan.

The Trades Union Congress (TUC) claims that at any one time, this would shut out one in six workers from the plan, according to a news report in the UK newspaper The Guardian.    One group, the Federation of Small Businesses wants the delay to be up to six months.

According to the TUC, those who change jobs frequently could end up with significantly less in contributions over their working lives, and groups most likely to be affected were “precisely the target group for the scheme.”

For example, the labor group suggested that among hotel and restaurant workers, 36% have been in their jobs for less than a year, while 90% do not have an occupational pension. In retail, argued the TUC, 22% of employees have been in their current jobs for less than a year.

The TUC’s input and that of the nation’s business lobbying groups is part of public comment the government is gathering on the White Paper it published in May, which mostly included ideas from the recommendations of Lord Turner’s Pensions Commission, according to the Guardian (See UK Pension Paper Said to Favor Auto Enrollment ).  

Adding a qualifying period is part of employers’ effort to dilute the pension reforms, claiming that the plan would prove an administrative headache for thousands of businesses.

Government officials are studying options before publishing their response this year to the Turner report. The government accepted that employees should be enrolled in a national pension savings plan, with an opt-out, but it has yet to finalize how the scheme would work in practice.

Among the key proposals in the Turner report are:

  • The state pension age for men and women will rise to 66 in 2024, to 67 in 2034 and 68 in 2044; each rise will be phased in over two years.
  • During the next parliament, the state pension will become more generous and future increases will be linked to earnings rather than prices.
  • The number of years it takes for people to qualify for a full basic state pension will be cut to 30.
  • From 2012, people will automatically be enrolled into a new, low-cost national savings scheme, although they have the chance to opt out if it is not suitable for them.