Staff may be forced into firms' pension

Patrick Hosking12 April 2012

EMPLOYEES should be forced to join company pension schemes in certain circumstances, according to the man advising the Government on how to tackle the looming pensions crisis.

Giving employers the right to force their staff to join the company pension scheme is the centrepiece of an imminent report into pensions by Alan Pickering, former chairman of the National Association of Pension Funds.

Staff have been free to opt out of company schemes in favour of private provision since 1988, when personal pensions were introduced.

Pickering is also expected to tell ministers they should consider scrapping the second State pension as a way of simplifying the complicated pensions industry. He warned that doing nothing would lead to poverty in old age: 'If we don't change our regulatory ways, the danger is not mis-selling but not selling or not buying,' he said in an interview .

The outlook for pensions has worsened in recent months as dozens of blue-chip employers axe generous 'final-salary' style schemes for new recruits in favour of cheaper 'money purchase' schemes. With final-salary schemes, employees are guaranteed a pension regardless of how long they live or how poorly the stock market performs. With money purchase schemes, all the risk passes to the employee.

With rising longevity and falling investment returns, the industry has been warning that people are not saving nearly enough for their old age.

Pickering said that he wanted to cut red tape and simplify pensions. The current range of more than 20 pensions should be cut to just two or three. Pickering, a partner with pensions experts Watson Wyatt, also called for a relaxation of the rules for both companies and employees. People should be given more freedom to contribute to more than one pension at a time, he said.

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