Nearly two-thirds of U.K. companies would be willing to make a minimum pension contribution of 10% of pay above current National Insurance contributions, as long as the change were phased in over a five- to 10-year period, according to a survey by Aon Consulting, London.
The U.K.'s entire pension system is under review by the government, which is expected to publish proposals next year. Many observers favor scrapping the pay-as-you-go State Earnings Related Pension Scheme with a funded system, although there is less consensus over whether to make contributions to a supplementary scheme mandatory.
A surprisingly high 63% of respondents in the Aon survey said they favored making additional mandatory contributions of 10% of pay, while 84% said they would accept an employer's contribution of 5% or more.
If such contributions became mandatory, 56% of the companies would review their current retirement plans. Of these, 42% said they would move to defined contribution and 29% would go for a hybrid scheme. The rest expect to shift to flexible benefits or other arrangements, and 7% would close their plans.
In comments to the Department of Social Security on its pension review, the U.K.'s National Association of Pension Funds and other consultants favor scrapping SERPS as it exists and adopting compulsory pensions.
However, the Confederation of British Industry, representing U.K. businesses, opposed additional compulsory pension contribution because it would increase labor costs of many companies, particularly smaller firms.