Pensions

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 Act 2007 puts into law the reforms to the state pension system set out in the Government’s White Paper Security in Retirement: Towards a New Pension System, published on 25 May 2006, following on from the Pension Commission’s work led my Lord Turner. The Government published a second white paper, ‘Personal Accounts: A New Way to Save’ in June 2007. As a result of this consultation the government introduced a new Bill to Parliament on 5 December 2007. The new Bill proposes a system of automatic enrolment, together with minimum employer contributions that will provide access to a private pension to all eligible employees between 22 and State retirement age, who are not currently enrolled in a qualifying workplace pension scheme. There remain many unanswered questions. The method of payment collection, although this will perhaps be collected through additions to payroll software with payments made to the Personal Accounts Delivery Authority (PADA), rather than HMRC, whilst the payment system is in its infancy.  PADA was created by the Pensions Act 2007 to advise on the reform proposals and develop the payment system. The current Bill outlines the duties of employers; however the detail of those duties will be contained in secondary legislation that is yet to be announced.

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.