Letter published in the FT asking why employers should be compelled to contribute to their employees’ pensions
by Dr. Ros Altmann
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I very much welcome the Pensions Commission report, but I do not believe that it has made the intellectual case for compulsory employer contributions. I fully agree that basic rate tax relief is not a sufficiently strong incentive to make pension contributions attractive to the mass market. I also agree that a pound for pound match (as implied by the Brit-saver, with 4% employee contributions being matched by another 4% from Government and employer) is likely to prove enticing. However, why should employers be legally obliged to pay into an employees’ pension? Would an employer be expected to also chip in to their workers’ mortgage repayments? Unless the 3% employer contribution is voluntary, it is simply a tax on employers. If the Commission thinks that extra tax expenditure is required, to provide meaningful savings incentives for the mass market, then this should be made transparent. In essence, the Commission is treating the employer as the fairy godmother who can solve the difficult problem of providing meaningful enough incentives to encourage reluctant workers to actually save. Let’s see pensions for what they are – either state provided social welfare, or a long-term savings vehicle which is the individual’s responsibility. Employers can be a useful conduit for access to cheaper pension arrangements, but the paternalism of the last century no longer applies in today’s world.