UK - Mercer Human Resource Consulting has hit out against calls for compulsory pension contributions, saying that it would not encourage people to save for retirement.
Recently, the Trades Union Congress (TUC) renewed pleas for employers and employees to be forced to contribute. But Mercer argued that this move could prove counter-productive, giving the government space to remove existing “limited” tax relief on pensions.
Matthew Demwell, European Partner at Mercer, said: We don’t believe compulsion is the answer. Whatever the minimum contribution may be, it will not be enough for some. For others, the trade off would be a wage cut, with the net effect being too much saving and not enough income while at work. It’s a denial of market forces.”
Demwell highlighted that compulsion has worked well in Australia, often flagged as an example, but only because it was introduced in exchange for a pay rise at a time of relatively high inflation.
“There was no new employer money on the table, as would certainly be the case here, too.
On the eve of its annual Congress (Sunday), TUC general secretary John Monks argued that employers should contribute a “decent amount” towards an employee’s pension. In turn employers should be allowed to compel staff to join a scheme, in a bid to redress the failure of some workers to start saving until too late.
The TUC’s proposals do nothing to help the self-employed or the unemployed, but providing a decent basic pension for all would,” said Demwell, who also pushed for an increase in incentives such as tax relief, a reduction in red tape, and more investor education.
Seen as investments, pensions are no longer as attractive as they used to be. For some, the minor tax reliefs barely justify the lock-in. Other problems are their complexity and administration costs. What we need to guard against is harming the competitiveness of British industry - which compulsion could well do.”
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