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Experts fear NI rise will kill off stakeholder compulsion

Chancellor Gordon Brown&#39s rise in National Insurance contributions could make stakeholder compulsion a non-starter, according to pension experts.

They believe the chances of making stakeholder compulsory have plummeted now that NICs have been raised by 1 per cent for both employers and employees as they think many will see pension compulsion as a tax too far.

NICs had been mooted as the method for bringing in compulsion but now that the NI rise has been earmarked for the NHS, experts think it is highly unlikely to be used for forcing pension provision in the future.

They think the Government will concentrate on using tax incentives to encourage bigger contributions or may reinstate compulsory membership of occupational schemes.

Norwich Union director of pensions development Jerry Barnfield says: “The Government will be waiting to see how its experiment with increasing contributions to fund the welfare state pans out. In this environment, compulsion can only be seen as another stealth tax.”

Winterthur Life pension strategy manager Mike Morrison says: “Gordon Brown has taken a lot of stick over the tax increases, which means it is less likely to get compulsion. It would be a tax too far.”

Scottish Equitable pensions development manager Margaret Craig says: “This makes compulsion through the NI system less likely. The reaction to the Budget bears out some of the points in the compulsion debate.

“It is difficult to see how it would be presented and not come across as a tax.”

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