Higher Retirement Age

Private businesses could well be forced to carry on making job cuts and lowering wage settlements to foot the bill for rising payroll costs, making employees the real victims if employers’ pension contributions carry on rising.

Said Gerald Irwin of Sutton Coldfield based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency, “Not only will employers have to make significant efficiency cuts to bridge the pension gap, there is no firm evidence either to say that promoting pension contributions as an employee ‘per se’ has any positive effect on recruitment, retention or motivation. Put bluntly, SME employers have absolutely nothing to gain.”

If the private sector retirement age carries on rising in comparison to the public sector, this will be potentially extremely damaging for SME employers. Not only in terms of cost but it will also make it increasingly difficult to attract the best staff as the public sector will be perceived to be offering greater job security.

“While larger organisations with established schemes may well be content with the idea of compulsion, smaller employers may have more issues around the time, cost and expertise to administer such schemes. For those with just a couple of employees, they will be ill-placed to run a scheme of any sort”, added Mr. Irwin.

The upshot is that, if private sector businesses are compelled to contribute more to pensions over the coming years, all employers will have to find this money from planned payroll budgets. This means they will have to explore ways of improving efficiency which could include job cuts and lower wages. In turn, this disadvantages small businesses by making them far less attractive as employers. A double blow all round then!