Company pension payments 'may be cut'

10-11-2006

Company pension payments 'may be cut'
Two-thirds of UK employers plan to reduce pension payments to new employees when a forthcoming government-supported national pensions savings scheme is introduced, research has suggested.

A further 23 per cent of employers said they intended to cut the level of pension contributions they paid to existing workers once the system of personal accounts was introduced in 2012, the poll by Scottish Widows found.

Under the proposed scheme, one of a series of recommendations made in the recent government white paper on pensions to encourage people to save for their retirement, employers will be required to contribute to workers' pension schemes at a minimum rate of three per cent of their salaries.

Employees themselves will contribute a minimum of five per cent to the personal accounts, while the government will also make contributions to the accounts through tax relief.

However, the research by Scottish Widows shows that while some employers make contributions to existing workplace pension schemes above the three per cent level that will be required from them under the new scheme, many are planning to "level down" their contributions to the minimum amount set by the government.

Scottish Widows claims that if the trend indicated by its survey of 750 employers is reflected across the country, company pension provisions in the UK will be less generous once the government's new scheme is introduced than they are today.

Commenting, Ian Naismith, head of pensions market development at the investment firm, said: "It is very worrying that companies who already have generous pension arrangements are likely to reduce their contributions once personal accounts are introduced.

"The government needs to make it as easy and worthwhile as possible for them to retain their existing arrangements," he added.

The Scottish Widows research, which also saw 6,000 individuals questioned about their attitudes towards the government's proposed national pension scheme, also claimed that employees could increase the amount of income they would receive from a personal account by 32 per cent if they opted to retire at 68, instead of 65.

However, 58 per cent of people said that they would be unprepared to work beyond the current retirement age.


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