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UK – CBI welcomes new auto-enrolment reform

15 March 2012

The CBI, one of the UK’s business organisations, today welcomed the plans on auto-enrolment by the Work and Pensions Select Committee but also said they were disappointed by the Committee’s lack of focus on why the National Employment Savings Trust (NEST) may struggle “to compete with low cost private sector competitors.”

From October 2012, employees will be automatically enrolled into workplace pension schemes for the first time, which will require employers to set up pension schemes for their staff and make individual contribution to employees. Temporary workers will also be eligible for auto enrolment into workplace pension schemes.

“The Committee’s endorsement of auto-enrolment plans is welcome. The change is a key part of developing a sustainable pension system in light of the longer, healthier lives we are enjoying. We will all need to work for longer and, crucially, save more,” said Neil Carberry, the CBI Director for Employment Policy.

“The Committee is also right to support a simpler state pension and to encourage government to look again at the interaction between long-term savings for pensions and saving for housing.”

But Mr Carberry was cautious about making more changes and said that “with the introduction of auto-enrolment just a few months away, we would caution against making further changes to what is a carefully balanced regulatory framework. The review of NEST scheduled for 2017 is the right time to address issues such as which controls have placed on saving into NEST.”

NEST was established as a low-cost pension scheme to help deliver the auto-enrolment programme, but the Work and Pensions Select Committee believes that restrictions placed on NEST, such as a cap on annual contributions and a ban on individuals transferring existing pension pots into NEST, could come as a disadvantage for some employees and could increase complexity.

The Chair of the Work and Pensions Committee, Dame Anne Begg, said "By lifting these two key restrictions placed on NEST, the Government would remove barriers that might currently prevent employers from choosing NEST as their pension scheme, as well as making it easier for employees to bring together the other small pension pots they are likely to have. This will help reduce the multiple administrative charges that many people pay and help them to understand the total retirement savings they will have built up.”

However, Mr Carberry pointed out it was disappointing  that the Committee “has not focussed on the real reason why NEST may be struggling to compete with low-cost private sector competitors, which is its high and complex charging regime.”

The CBI is the UK's leading business organisation, representing around 240,000 businesses which together employ about a third of the private sector workforce. The organisation has a heavy national presence but also operates internationally Brussels, Washington, Beijing and Delhi to represent the British business voice.

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