Written Evidence to be reported to the House.
Pensions Bill
1:15 pm
Ian Farr: I think that some levelling down is almost inevitable. If you have an employer with a pension scheme where the contribution is 10 per cent. and 30 per cent. of the staff are members and then, through auto-enrolment, the proportion of staff who are members rises to 60 per cent., to stop the outgoing pensions contributions doubling the employer could reduce the contribution by a half to 5 per cent. There will be a concern among finance directors about the membership doubling from 30 per cent. to 60 per cent. and the 10 per cent. contribution doubling. Therefore the danger is that the finance side of the house might say that they want to reduce the contribution down from 10 per cent.
I accept there is an argument that would say that perhaps it is better for society as a whole if there are 60 per cent. in the pension scheme, with a 5 or 6 per cent. contribution, than only 30 per cent. with a 10 per cent. contribution. We do not have strong views about that but we think that levelling down is almost inevitable with some employers, looked at from the financial point of view.