Employers need to be given a defined line between providing information and advice on pension arrangements, a select committee has been told.
Giving evidence to the Work and Pensions Select Committee, EEF head of employment policy Tim Thomas said employers were naturally cautious on providing information on pensions to avoid providing advice, which could leave them financially liable.
He said: "That caution may manifest itself in employers giving less advice than is safe to give."
The guidelines, which he referred to as a ‘safe harbour' arrangement, would provide clear rules on which "side of the line to operate on", Thomas said.
Safe harbour arrangements are in place in US law which decrees that employers cannot be sued if they follow the steps put in place to create a qualified investment default alternative.
He added: "We'd like to see employers provided with clarity on what is information and what is advice, and that is essentially what we call safe harbour."
Thomas said it didn't matter whether the limits were defined by a code of practice or regulation, but the Financial Services Authority (FSA) had to be involved as employers needed to "know where they stand".
In the same session, Confederation of British Industry (CBI) director for employment and skills Neil Carberry called on regulatory bodies to change their approach to communications, focusing on quality over volume.
He also said it was primarily the responsibility of the industry to ensure pensions are made attractive to those on lower incomes.
He said: "The combination of auto-enrolment plus the phasing in of contributions would make it easier to scoop up that group, and the third leg of that stool is to improve the level of communications."
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