Government’s mixed messages are threat to private sector pensions


Government’s mixed messages are threat to private sector pensions

Prospect has warned the Government not to implement proposals that would accelerate the trend for defined benefit pension schemes in the private sector to close down.

Responding to today’s findings by the Association of Consulting Actuaries that private sector pensions are in a state of ‘seismic collapse’ (, Prospect said there was a real danger the Government’s own plans would result in employers closing defined benefit schemes to hundreds of thousands more workers.

In particular, its proposal in last year’s Green Paper ( to create a single state pension would involve employers losing their current national insurance rebate for providing good quality defined benefit schemes.

Neil Walsh, Prospect Pensions Officer, said: “Abolishing the national insurance rebates that employers who offer good quality, final salary schemes currently enjoy will pour petrol on the flames of pension scheme closures. The Government’s proposal would result in higher national insurance contributions for millions of employees, undermine employers providing decent pensions and make a bad situation much worse.”

Prospect’s experience of collective bargaining on behalf of its members in the private sector is that they are far more likely than average to be offered a pension and more likely to be in an open final salary pension scheme.

Walsh said: “Strengthening trade union negotiating rights over pensions would clearly have a positive effect on pension provision in the private sector. All the evidence shows that where workers are well organised and represented by trade unions their pension outcomes are significantly better than average.”

While the number of closed defined benefit schemes in the private sector has increased, by far the greatest disparity in pension provision between the private and the public sector is the number of employers in the private sector who do not offer any pension scheme at all.

Walsh added: “Government should build on the consensus for the introduction of auto-enrolment to pension schemes rather than delay its implementation, as it has done. To date, the Government has shown more interest in driving down public sector pension provision than improving pension outcomes for workers in the private sector.”