STRY breathed a sigh of relief yesterday, after the government watered down plans to boost the number of private pension savers.
The government is still pressing ahead with plans to enrol millions of workers into a pension scheme automatically from 2012 onwards, but made several concessions following intense lobbying from businesses.
By 2017, the vast majority of employees will be contributing five per cent of earnings to a pension scheme, with most employers required to make minimum contributions of three per cent.
A state pension scheme, the National Employee Savings Trust, will be created as a low-cost option for employers that do not have a scheme, although it will be made available to all firms.
Employees will be able to opt-out if they wish, but industry calls for an opt-in scheme were discounted by the government.
Even the smallest businesses, such as market stall traders with a single employee, will be required to auto-enrol their workers, provoking anger from SME lobbyists.
However, the government toned down the plans, inherited from the previous Labour administration, earning plaudits from the likes of the Institute of Directors.
The minimum earnings threshold for auto-enrolment will now be set at £7,475, compared to the previous limit of £5,035, and this is expected to rise considerably by the time the smallest firms have to comply.
Peter Woods, pensions partner at PwC, said the new limit would mean that around a quarter of staff at a large retailer like Tesco would not be automatically enrolled.
And employees must have completed at least three months of service before they are enrolled, meaning that temporary and casual staff will likely fall through the net.
Liberal Democrat pensions minister Steve Webb said: “Our reforms will ensure that millions of people will start to save for their retirement, many for the first time.”