IoD calls for two year postponement of pension auto-enrolment

Dated: 21 November 2011

The Institute of Directors has today (Monday) called for the Government to postpone the phased introduction of auto-enrolment pensions for two years (until 2014). Under present plans employers will begin to automatically enrol staff onto pension schemes from October 2012.

The IoD is opposed to the introduction of auto-enrolment on the proposed timetable for three key reasons:

  • This regulation comes at a time when real incomes are being eroded by inflation. The last thing we need now is to further reduce spending power by creating employee pension contributions for all workers earning more than the income tax personal allowance.
  • Many employers are currently struggling to find the resources to offer their staff salary increases. When auto-enrolment commences, firms may find the additional employer contributions swallowing up any potential pay rises. When IoD members were asked earlier in the summer how they would make up the contributions, one third said they would be forced to freeze salaries.
  • Employees have the opportunity to ‘opt-out’ of auto-enrolment. With household budgets already stretched, many employees will prioritise income now over future retirement savings. The IoD predicts high levels of employee opt-out as a result. This means the policy would fail in the Government’s objective to increase pension saving, while loading employers with unnecessary administration.

Commenting on the Government’s proposed timetable, Simon Walker, Director General of the IoD, said:

“This is the wrong time to be implementing pension auto-enrolment. The Bank of England’s downward revision last week of their growth forecasts for this year and next shows that companies and households are hard-pressed. Real incomes are being squeezed and employers are struggling to offer staff pay rises.

“It is not too late for a change course – if the Government defers auto-enrolment at next week’s Autumn Statement, it will have done so before most businesses have even considered the impact of the new rules. A few months ago when we asked, one in five of our members did not even know the legislation was coming into effect from next year.

“The IoD proposes that the Government delay the introduction of auto-enrolment by two years. This would give businesses time to strengthen their balance sheets while not undermining consumer spending when it’s at its weakest.”

He added:

“Those businesses that have begun preparations and wish to press on should be able to do so voluntarily. However, forcing businesses into auto-enrolment from 2012 would be counterproductive.”

ENDS

Contact Points

Edwin Morgan
Media Relations Manager
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
Tel: +44 (0)20 7451 3392
Mob: +44 (0)7814 386 243
Email: edwin.morgan@iod.com
Website: www.iod.com/policy

Notes to editors

  • The Institute of Directors (IoD) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with approximately 38,000 members in the United Kingdom and overseas. Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors. Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies.
  • The IoD provides an effective voice to represent the interests of its members to key opinion-formers at the highest levels. These include Government ministers and their shadows, parliamentary committee members, senior civil servants and think-tanks. IoD policies and views are actively promoted to the national, regional and trade media. Follow us on Twitter to get the IoD’s reaction on business and public policy issues.
  • The IoD offers a wide range of business services which include business centre facilities, with ten UK centres (three in London, one each in Reading, Birmingham, Cardiff, Manchester, Nottingham, Norwich, Edinburgh, Glasgow and Belfast) and one in Paris, conferences, networking events, virtual offices, issues-led guides and literature, as well as free access to business information and advisory services. The IoD places great emphasis on director development and has established a certified qualification for directors – Chartered Director – as well as running specific board and director-level training and individual career mentoring programmes.
  • For further information, visit our website: www.iod.com