Call to simplify auto-enrol pension rules

The CBI urged the Government to press ahead with plans for auto-enrolment, warning that failing to tackle the issue of pensions under-saving now would lead to greater costs for the Government, employers and workers in the long-term.

But it said simplification of the rules was essential to make them easy for the smallest firms to comply with, as well as for companies that would be bringing large numbers of people into pensions for the first time.

From 2012, workers will automatically be enrolled into their company pension scheme, although they will retain the right to opt out.

Individuals will have to contribute at least 4 per cent of their pay, with companies adding 3 per cent and the Government topping this up with 1 per cent.

But the CBI is calling for workers to be enrolled into a pension three months after they have started a new job, rather than on day one.

It said this would avoid people on short-term assignments being auto-enrolled, and would reduce the cost for employers of enrolling staff who would then quickly opt out of the scheme.

The group said this reform would be better than excluding micro-businesses from the changes, as firms that employ fewer than five people make up 95 per cent of businesses.

It said most of these firms currently offered no pension provision, so excluding them from the reforms would not tackle the underlying problem of a lack of pension saving.

Katja Hall, CBI director of employment policy, said: "With an ageing population, more people need to save for their old age.

"Automatically enrolling people into pension schemes is the right thing to do, but the reforms must cover all employers and be easy to implement."