ScotEq says compulsion will be Govt&#39s last resort

Three-quarters of IFAs expect the Government to introduce compulsion on employer contributions to funded pensions, according to research from Scottish Equitable.

Its survey of 1,800 IFAs found that 75 per cent believe compulsion is inevitable in the face of doubts over whether stakeholder is reaching its target market.

However, ScotEq believes that, for political reasons, the Government avoid introducing compulsion unless it exhausts alternative options.

It claims the Government fears compulsion would prompt employers to seek ways to offset their contributions, possibly through lower pay rises.

ScotEq says a more likely approach is for the Government to offer incentives for firms to make pension contributions by reducing their National Ins-urance contributions. It could also improve rebates for contracting out to enc-ourage employees considering a private pension to make the switch.

Alternatively, ScotEq says the Government could introduce penalties for employers failing to increase their contributions by giving adverse tax treatment to the pension plans of directors and senior executives.

Pensions development director Stewart Ritchie says: “While it is essential that action is taken to achieve the aim of better pensions for all, for political reasons we think the Government will view compulsion as a last resort. We believe it is more likely to use a carrot and stick approach to boost the level of pension contributions.”