Unions have warned UK companies are not adhering to promises of sharing the "burden" of pensions saving with employees.
Brendan Barber, TUC general secretary, speaking at the CBI pensions conference says while the retreat from good occupational schemes has recently increased, the employer commitment to these schemes has been on the decline for some time.
Barber says employers have argued in the past since they shouldered the investment risk in final salary schemes, they should have control of the surplus.
In recent years there have been high profile court cases between employers and members for control of that surplus, as scheme members argued the surplus was effectively their money and part of the employment promise to supply a decent pension at retirement.
According to the latest Inland Revenue statistics, employers used surpluses to take contributions holidays and reductions worth £18.15bn between 1988 and 2003, while also taking direct refunds of surplus worth £1.2bn.
Barber adds: “The argument ran, if things became tight the employer would fulfil their part of the bargain and keep the scheme going. There was an implicit promise that employers would do the right thing.”
The TUC says in trying to get rid of the burden of investment risk, final salary schemes have been "shut in their hundreds" with one in four final salary schemes closed in 2003 alone.
The union body estimates over half the UK’s biggest employers do not offer final salary schemes to new entrants, with smaller firms painting an even bleaker picture.
Barber says: “In short, thousands of employees are being shifted into riskier schemes which may not suit their needs, whilst at the same time employers are significantly cutting back the amount they contribute.”
He adds: “The Pensions Commission report does not mince its words on this subject.
"Talking about the projected decline in future pension saving it says: ‘The biggest element of this decline is the reduction in the generosity of employer pension contributions’.”
Barber used the conference to further reiterate the TUC’s stance on "greater compulsion" believing it will improve both the extent and quality of pension coverage.
He says: “Just look at Australia, where the compulsory superannuation system has successfully increased both savings and the coverage of pension schemes. For example, 75% of part-time female employees in Australia are covered by superannuation, more than double the number covered here.”
He adds while further compulsion represents a "significant change", the scale of the pension problem indicates 12m Britons are not saving enough for their retirement, a figure highlighted in last week's Turner report.
A recent survey conducted by Axa found more than half the nation sees compulsory pension contributions as a possible solution to tackling the country's £57bn pensions shortfall.IFAonline
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