Box-tick on pensions and expect nasty shock in future, says Webb
UK COMPANIES could be sued for hundreds of millions of pounds if they continue to provide the bare minimum in pensions for employees, former pensions minister Sir Steve Webb has warned.
Sounding an alert on the government’s auto-enrolment pension scheme before contributions rise next year, Sir Steve said a laissezfaire approach to the change – which makes it compulsory for companies to enrol staff on to a pension scheme – could land boards in deep water and even in court.
“This is not hole in the corner stuff – if thousands of people get a poor outcome you could be talking serious money,” Sir Steve said of potential payouts, pointing to the US where employers have coughed up more than $350m in legal settlements since 2009. Sir Steve, who was pensions minister between 2010 and 2015 and is now a director at Royal London, has said in a policy paper written with law firm Eversheds Sutherland that courts may in future come down on those currently complying with the law if their schemes aren’t seen as good value for staff.
“Politicians and regulators have a knack of coming back years after the event and deciding that what was deemed ‘good enough’ at the time was not ‘good enough’ in hindsight,” he warned.
The paper claims that many employers assume once they have enrolled staff onto a scheme this is largely “job done” – ignoring examples in other countries where firms have faced legal action for not getting staff the best outcome. Auto-enrolment was first announced in 2012. As of September 807,000 firms complied. The minimum total contribution will rise to 5pc, and then to 8pc in 2019.