Compulsory pension contributions reaffirmed

Blair and Brown at odds over affordability of proposals

Lord Turner has firmly defended his plans for pensions reform, including compulsory contributions by employers, as rumours abound of a growing rift between the chancellor and prime minister on whether the proposals are affordable.

Delivering its final report on the matter, the government’s Pensions Commission, chaired by Lord Turner, has stuck to its chief proposal to raise the state pension age from 65 to 68 by 2050 and link any future increases to earnings rather than inflation.

Compulsory contributions by private employers will also go forward to the next stage despite what Lord Turner said were ‘legitimate concerns’ raised by small business. Overall, he said, public opinion was in favour of the move.

“The Commission has been heartened by the large degree of consensus which has emerged around the second report,” Lord Turner said.

“There is considerable support for a level of ‘contingent employer’ compulsion although business organisations have raised legitimate concerns about the costs of this for small businesses.”

Business has lambasted the proposal, claiming it will harm the very businesses that are expected to provide the backbone of the economy, namely small, family-owned businesses.

A recent study by the British Chambers of Commerce (BCC) found that 20% of companies expect they will have to make redundancies if forced to pay into a pension scheme.

“While life in the private sector has got tougher with rising costs and more competitive pressures, the public sector has enjoyed rising salaries and unfunded final salary pensions,” said BCC director general David Frost.

“Businesses simply cannot cope with any added costs pressures, for some it could be the tipping point.”

In addition to compulsory contributions, the Commission has also called for workers to automatically be enrolled into a new government-run savings scheme; though, they will retain the right to opt out at their discretion.

Today’s final report comes amid growing speculation of a new political falling out between Gordon Brown and Tony Blair. The chancellor is said to believe the proposals to be unaffordable, while the prime minister favours the Commission’s agenda.

The government is due to release a white paper on pensions reform next month.

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