Blog: Decent pensions are not a political trading chip

In what cynics would have called inevitable, the government yesterday backed down on auto-enrolment plans.

Pensions minister Steve Webb announced auto-enrolment will be delayed by a year for all businesses with fewer than 50 employees, and firms with up to 3,000 employees could also have their staging dates pushed back.

Employer groups have long argued for exemptions for small businesses, delays and reduced contribution minimums for their members, citing the squeeze on business caused by the recession as their reasoning.

The government could not build its entire mandate on stimulating the economy and then place a huge burden on businesses.

Webb has said auto-enrolment will still go ahead in full. However, there are already fears the delay is the beginning of a slippery slope leading to more watering down of the reforms.

If the reform is unpalatable now, will there ever be a convenient time for it?

"The government is showing signs of panic, after 18 months of robust pension reform," said Tom McPhail, head of pensions research at Hargreaves Lansdown.

"The pensions crisis will only get worse if governments are not prepared to take tough decisions."

Maggie Craig, director of life and savings at the Association of British Insurers said: "It will be very important that this is not allowed to slip."

"We need a firm timetable so that employers are clear what is expected of them," said Craig.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), added: "Businesses will quite rightly be wondering how much faith they can have in the system, and whether more upheaval is in the pipeline."

The delay causes inequalities for employees and employers too.

Segars added: "This decision risks creating competitiveness issues where small firms are competing with larger companies who are going ahead with auto-enrolment."

Fraser Smart, director of Buck Consultants Europe, said "Why should employees lose out on pension contributions just because they work for a smaller employer?"

Adrian Boulding, pensions strategy director at Legal & General and co-author of the government's Making Auto-enrolment Work report said delaying reform now will hit baby boomers hardest.

"The baby boomers are still in work at the moment and they need to be saving now for their retirement," he said.

Auto-enrolment was sold as the catch-all solution that would sit alongside state pension reform and fix the pensions crisis, just as stakeholder was.

Unlike stakeholder, let's hope further wrangling does not water down the effects.