Reported on Wed, 05 Apr 2006

New proposals calling for employers to contribute to their workers' pensions have been criticised for the impact they would have upon small and medium-sized enterprises (SMEs), but a business loan could help cover the extra costs.

Business lobbying group the Confederation of British Industry (CBI) has suggested that forcing smaller firms to supplement their employees' state pensions could have significantly detrimental effects.

Yesterday Lord Turner published the final set of proposed reforms in his pensions report, which advised that the retirement age be raised to 69 by 2050, that employees be automatically enrolled on pension schemes and that companies are obliged to contribute to them.

However, Lord Turner has conceded that employer contribution could have damaging consequences towards SMEs and stressed the importance of measures that would "mitigate the cost impact on small business".

But John Cridland, deputy director general of the CBI, claims that this is simply not good enough.

"The pensions commission admits compulsion would have a harsh impact on businesses and calls for consideration of permanent aid to smaller firms, but claims there is no viable alternative. This is wrong," he said.

"There are business-backed alternatives from the CBI, which will integrate fully into Turner's package and actually achieve a better result. The government must heed them."

Now that Lord Turner has presented his recommendations to the government, prime minister Tony Blair and pensions minister John Hutton are expected to implement the majority of the proposals.

A business loan could allow SMEs to directly cover the cost of contributing to their employees' pension schemes.

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