13 May 2005
David Blunkett would face stern opposition from businesses if he introduced compulsory savings in response to the escalating retirement crisis, experts have warned.
The National Association of Pension Funds, which represents employers managing retirement assets, told Public Finance it was opposed to moves to compel the public or businesses to pay into pension pots, despite signs from Whitehall that the option could be considered.
Blunkett reopened the debate over retirement savings soon after being appointed secretary of state for work and pensions. Asked by the BBC on May 8 whether he would consider compelling workers to save for their retirement, he said: 'I made it clear when I talked to the prime minister…that there are no off-limits here. We have got to be able to address quickly and decisively where we are going.'
Blunkett's statement does not commit him to compulsion, but is the strongest indication yet that the government could force people to save in order to overcome a £40bn annual national shortfall in pension savings.
Blunkett this week met Adair Turner, the chair of the government's Pensions Commission, to discuss government strategy.
Turner, who was expected to address the NAPF's annual conference on May 13, published his interim report into Britain's pensions crisis last autumn. He is understood to be considering compulsion. But in 2004, he indicated that his most likely response to savings shortfalls would be a mixture of policies designed to make people work longer, save more and, possibly, pay more tax.
The Trades Union Congress, representing 6 million workers, has led calls for compulsion.
But the NAPF believes that would be a flawed solution. Andy Fleming, NAPF spokesman, said: 'Compulsion should be a last resort because it is inherently difficult to balance. How, for example, can you compel people on low incomes to save? Government policy in that direction would require a minimum income cut-off point, making it discriminatory.'
Fleming said the NAPF also opposed compelling employers to pay into retirement pots. 'A minimum employer contribution level would, by definition, have to be set low to help smaller employers. That would simply encourage firms that currently pay more into staff pensions to reduce contributions.'
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