The
Queen’s Speech at the opening of parliament confirmed that the
government intends to introduce legislation to protect workers’
retirement funds if their companies go bankrupt.
Employees
are pushing for the introduction of compulsory investment into pension
plans to avoid poverty in old age, and the government says the new
regulations, due to come into force in 2005, will make sure workers
receive a decent pension.
"Legislation
will be introduced to encourage employers to provide good quality
pensions, and individuals to save more effectively for their
retirement," the Queen told parliament.
A
pensions protection fund is to be set up to protect employees and
pensioners if companies become insolvent.
A
report by research group Datamonitor says about 71% of people in pension
schemes say Britons should be forced to save to plug a £27bn gap between
what they put aside and what they need for an adequate retirement income.
Nicholas
Stephens, author of the report, says: "It is now up to individuals to
save. If they are not doing it, some people agree they should be made to
do so. It is becoming increasingly clear there are shortfalls for
individuals when it comes to their retirement."
The
Datamonitor survey also found 12% of respondents said compulsion was not
needed, 11% rejected it as another type of tax and 6% had no
opinion.
But
compulsory pension saving has prompted opposition from business groups
such as the Confederation of British Industry, while the Trades Union
Congress has said it supports compulsory pension saving for workers and
their firms.
The
Datamonitor poll findings come as policymakers wrestle with a pensions
system creaking under the strain of an ageing population, the three-year
fall in equity markets and the closure by companies of hundreds of
final-salary pensions for new staff.
Earlier
this year the government set up a pensions commission to explore options
for reform, including compulsory pensions saving. The Inland Revenue is
also proposing to sweep up the existing mix of pension and saving tax
codes into a single system to promote saving.
One
idea put forward is for industry sectors - such as the media and
manufacturing - to set up collective pension schemes to protect employees
against poverty in old age.
Mick
McAteer, senior policy adviser at the Consumer Association, said last week
that trade unions, government departments and consumer lobby groups should
set up these pension schemes, into which people should be compelled to
save.
"As
a nation, we are not investing enough at any level - the government,
employers or individuals," said McAteer.
"We
have to take action to prevent the pensions crisis becoming a national
catastrophe in the future.
"We
need an industry-wide scheme or a collective not-for-profit national
pension scheme which will benefit from economies of scale and compulsory
saving plans."
He
added that consumer confidence in pension schemes was at an all-time low
because of the proliferation of corporate governance scandals and a
volatile stock market.
New
industry-wide pension models would restore trust because they would run as
not-for profit organisations with a board of trustees and consumer and
employer representatives.
Retail
pension insurers find it hard to deliver pensions which benefit consumers
and taxpayers and also meet shareholder demands, while employers are no
longer guaranteeing final-salary schemes.
McAteer
said: "The nation must save and we see no alternative to compulsory
saving which forces people to invest in their future and which is fair and
cost-effective."
But
not everybody is behind the need to make pension contributions compulsory.
Steve
Bee, head of pensions strategy at Scottish Life and its parent company,
Royal London, believes that is not the government’s intention. He feels
the government’s idea is to rebuild confidence in the pensions industry
and help people plan for their retirement, building on the strength of the
voluntary system.
"That
sounds like a vote of confidence in the voluntary system that we have here
in the UK and that’s good, that pleases me," says Bee.
"There’s
never been a law in this country forcing employers to set up and
contribute to pension schemes for their employees, yet they have done so
voluntarily and to the extent that we are the most pensioned people in
Europe."
