A major survey has shown that the number of manufacturers with occupational pension arrangements who believe that all companies should have to make a compulsory pension contribution over and above current National Insurance (NI) levels has markedly increased from a half, when first asked in 1998, to just over two thirds in 2004.
The findings come from the third major survey of pension provision amongst manufacturing companies and their views on pensions policy that EEF, the manufacturers’ organisation, has undertaken with Aon Consulting since 1998.
This survey of over 525 companies shows that 68% of respondents, the vast majority of whom provide occupational pension arrangements for their employees, now support some element of employer pensions compulsion compared to 50% and 56% when they were asked this question in, respectively, 1998 and 2002.
Whilst this support has decreased slightly over this period amongst manufacturers with 500 and more employees, it has increased amongst both manufacturers with less than 50 employees and those with between 50 and 499 employees.
The fact that these small and medium size manufacturers often face domestic competitive pressures from employers without occupational pension arrangements explains why an increasing number of them now seem to be seeking more of a “level playing field” for employer pension provision.
In addition, the level of support from manufacturers with occupational pension arrangements for all employees to have to make a compulsory pension contribution over and above current NI levels has remained more or less constant since 1998. It has only increased slightly from 74% of all respondents in 1998 to 77% in 2004 and this high level of support was broadly the same for all manufacturers irrespective of their number of employees.
Commenting on the survey, David Yeandle, EEF Deputy Director of Employment Policy, said:
“It should not be a surprise that a growing number of manufacturers with occupational pension schemes feel that, on grounds of competitiveness, there should be more of a level playing field for employer pension provision.
“However, this is a complex area and further compulsion could not be contemplated by manufacturers unless they see it as part of a satisfactory long-term solution to future pensions policy”
Donald Duval, Head of Professional Practice at Aon Consulting said:
"This latest pensions survey reveals a rise of 30% in the support for compulsory pension provision amongst this group, compared to the findings in 1998. This big increase shows that employers increasingly believe that the Government needs to take radical action to tackle the UK's pensions problems."
Some other key findings from this survey are:
Many small and medium size manufacturers with occupational pension arrangements are continuing to retain these arrangements on a voluntary basis for their employees despite increasing financial pressures.
Whilst defined benefit/final salary schemes are still the most common type of pension arrangement in manufacturing, the incidence of defined contribution or group personal pension arrangements has grown steadily since 1998.
Manufacturing companies' major concern about the future of their occupational pension arrangements is ‘reduced investment returns leading to increased costs’.
In 2004, the number of manufacturers closing their final salary scheme to new and existing members slowed down from the high numbers that closed them in 2002 and 2003 and nearly one in four respondents said that their final salary scheme was still open to new members.
Nearly two thirds of companies want the Government to set a standard retirement age of 65 when age discrimination legislation is introduced in October 2006 with only a quarter of them supporting a standard retirement age of 70 and even fewer felt that no standard retirement age should be set.
A quarter of companies had some full-time employees over 65 and nearly one third of them had some part-time employees over 65.
Nearly nine out of ten respondents felt that the State Pension Age for men and women should remain at 65 after 2020.
Commenting on the survey's findings on retirement age issues, David Yeandle, EEF Deputy Director of Employment Policy, said:
“These results indicate a growing recognition amongst manufacturers that some tough choices about future pensions policy will have to be made by employers, employees and the Government in response to the issues raised in the Pensions Commission’s Interim Report. However, the Government must avoid introducing age discrimination legislation in a way that discounts some of the range of policy issues that need to be considered and it should therefore set a standard retirement age of 65 when this legislation is introduced in October 2006.”