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Trade unions clash with CBI over companies’ compulsion

The TUC and CBI have clashed over pension compulsion, with unions demanding greater and mandatory employer contributions to stave off a pension crisis at the ABI Saver Summit.

TUC assistant general secretary Kay Carberry called for compulsory occupational schemes, with employers and employees compelled to contribute in a 2:1 ratio.
Carberry said compulsion is essential to stem declining employer contribution levels and, after an initial phase-in period, the combined contributions should rise to 15 per cent of salary.

She said: “We propose phasing in a compulsory scheme, with employers and employees contributing in a 2:1 ratio gradually rising so combined contributions are 15 per cent of pay.”

CBI deputy director general John Cridland pointed out that employer pension contributions have doubled in real terms over the past eight years to 37bn last year.

Cridland said compulsion is unsuitable for all companies, particularly at the smaller end of the market.

He argues for a three-way approach, with the Government guaranteeing that it will match contributions into occupational stakeholder schemes if the employer and employee both pay in 3 per cent each.

He said, given companies have been well incentivised to contribute to occupational schemes over the past 40-50 years, the fact that so many have chosen not to contribute is an indication of the problems that smaller companies have in funding occupational schemes.

Cridland believes that the Government should help industry set up sector-specific multi-company pension schemes that would enable, say, small technology or manufacturing companies to split the costs between them.

He said: “The big difference between the CBI and TUC on pensions is that we do not believe that it is reasonable or practical to expect the same of small employers as large employers.”

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