Reform of the pensions system to encourage more people to save for their retirement could be unaffordable for many workers hit by rising costs and static wages.
The warning comes from Watson French, the Truro-based independent financial planning and investment management company, in evidence recently submitted to the House of Commons Work and Pensions Committee.
Starting from next year on a phased basis, employers must provide a pension scheme to virtually all members of their workforce and make contributions to it. Workers must be enrolled automatically in the scheme and also contribute from their wages as part of the Government’s drive to get more people saving for retirement.
The changes are being introduced over four years, starting with larger employers first in 2012, and smaller employers from 2014.
But evidence from Watson French, which acts for a number of employee pension schemes, suggests that many will not be able to afford the contributions and will opt out, which they are entitled to do.
Director Nick Wood said he had submitted evidence of his concerns to the House of Commons Work and Pensions Committee, which is investigating the opt-out issue and has requested evidence from the pensions industry.
He said: “Although these changes were first advocated in 2006, they have not been given enough publicity. It’s the job of Government to make sure everyone – employers and employees alike – are fully informed as to what is going to happen and to instil an awareness and understanding of why this is necessary. That hasn’t happened so there’s a huge education job to be done.”