'£22bn stealth tax' for pension crisis

LABOUR was accused of creating a £22bn stealth tax after bosses were told they may be forced to make contributions to employees' pension schemes.

Work and Pensions Secretary Alan Johnson said more companies need to pay money into staff pension schemes - or face legislation to make such contributions compulsory.

His message was greeted with fury by business leaders, who said it would cost firms £22bn a year.

Johnson spoke amid mounting fears that millions of Britons will face poverty when they retire. Critics say the crisis has been fuelled by Gordon Brown's £5bn-a-year raid on pension funds.

But in a speech to the Association of British Insurers, Johnson tried to shift the focus off the Government and on to business. He said employer contributions were crucial in persuading staff to save into a company pension.

'If employers want to avoid being compelled to contribute a set amount to a pension, then we need to move towards a world where employer pension contributions are the norm,' he added.

'Where there is no employer contribution, pension take-up stands at just 13%. But with a contribution of at least 5%, take-up rockets to 69%.'

Most big firms make contributions to their employees' occupational pension schemes. But there is a growing crisis among smaller companies which have set up so- called stakeholder pension schemes - a flagship Labour policy designed to persuade more to save for their old age.

However, nearly nine out of ten of these schemes receive no employer contribution.

The CBI said company pension contributions had doubled from £18bn to £37bn a year since 1997.

Anthony Thompson, head of CBI pensions policy, said: 'Companies should contribute to pensions where they can afford to, but we have to face the fact that not all firms can. Compulsion could cost £22bn a year and for business that would be a straight tax on jobs.'