The call for simplification was made by EEF, the manufacturers’ organisation, in its response to the White Paper, ‘Security in Retirement – Towards a New Pensions Settlement’. Whilst supporting the government’s comprehensive and inter-related package of reforms, EEF believes that a number of important issues remain outstanding and need to be addressed, especially in connection with the new pensions saving scheme.
EEF Deputy Director of Employment Policy, David Yeandle, said:
“Government has now got the broad architecture of its pensions reform right. In particular, it must build on this by placing greater emphasis on simplifying the new pension savings scheme to make it easier for employers to administer and employees to understand.
It should also try to gain the active support of smaller businesses for these reforms by giving them financial support when this new scheme is initially introduced.”
EEF’s key recommendations for simplification:
· EEF believes the model for delivering the new pensions saving scheme should be based on the Pensions Commission’s National Pensions Saving Scheme as it would minimise administrative costs and risks for employers. However, it needs to be simplified to limit the number of decisions employees have to make when they are being auto-enrolled.
· As long as the process for auto-enrolling employees into this new scheme is simple for employers to administer, employees should be auto-enrolled when they start employment and without any age or earnings criteria. This should result in simpler legislation and maximise the opportunity for employees to be able to save for their retirement.
· The criteria for employers with "good" occupational pension schemes to be exempt from having to auto-enrol employees into the new pensions saving scheme must be simple and transparent. If these criteria include auto-enrolment, they should reflect the current practice of occupational pension schemes.
· Whilst EEF supports the proposed simplification of state pension arrangements, particularly the modernisation of the contributory system, it will remain complex. As such, EEF believes another review needs to be undertaken within the next 15 years to try to achieve a simpler system.
David Yeandle added:
"The government's package of pensions reform must encourage employers to retain their occupational pension schemes. In addition to pursuing better regulation, the government must not shoot itself in the foot by introducing new legislation, particularly adding occupational pensions to the statutory union collective bargaining agenda. This could only serve to undermine employers' support for occupational pensions."
Some other issues raised in EEF's response are:-
- Since smaller employers will have to cope with the additional costs of administering and making employer contributions into the new pensions saving scheme, the government must provide some initial financial assistance for them when this scheme is introduced.
- The new employee rights about auto-enrolment should be enforced in a targeted way using HM Revenue and Customs.
- The Government's plans to better regulate occupational pensions are welcome, but must avoid minor changes that might create administrative burdens for employers.
- Whilst supporting the proposed gradual increase in the State Pension Age, the uncertainty about future longevity trends means the Government's proposals must be regularly reviewed by an independent expert body.
ENDS
EEF, the manufacturers’ organisation is the representative voice of manufacturing in the UK with a federation of 11 regional Associations, UK Steel and ECIA, the Engineering Construction Industry Association. The EEF has a growing membership of almost 6,000 companies of all sizes, employing some 900,000 people from every sector of engineering, manufacturing, engineering