The auto-enrolment pension schemes are to be phased in over the next five years to ensure employees access pension benefits.
Auto-enrolment requires all employers to enrol their workers into a qualifying workplace scheme if they are not already in one. Employees can then opt out of they wish.
Vasu Majumbar associate director of corporate finance at Grant Thornton told FoodManufacture.co.uk that there should have been lengthier consultation with employers before the “blanket scheme” was introduced.
While the aim was laudable, the costs of setting up an auto-enrolment pensions schemes would hit small food manufacturers in particular. “These companies will be looking at ways to minimise cost and setting up a pension scheme when you have very low head count might not be considered the most important priority. However, there are ways to minimise the costs when you look through the detail.”
The news of the auto-enrolment proposals came at a difficult time for employers, in a recession and with yields on government bonds, on which pension deficits were calculated, in decline over the last 18 months, he added.
Julian Wild, food group director of law firm Rollits told FoodManufacture.o.uk: “The food industry tends to employ a large number of people, and many have long service records. Pensions are a massive ongoing issue. Pension liabilities on final salary schemes, most of which have now closed, are the biggest strategic issue facing a lot of major food manufacturers.”
Meanwhile, retailer and major food manufacturer Morrisons is spending millions of pounds launching a new staff pension scheme this month, saying it fears being left with an unmotivated elderly workforce who can’t afford to retire.
Its “Cash-Balance” pension scheme sees employee makes defined contributions into a scheme, which is invested in stocks and shares. However, the employer guarantees a minimum final pension pot, regardless of the performance of the fund.
The pension plan being marketed to Morrisons 131,000 staff in multi-million pound “Save your dough” campaign, fronted by TV finance personality Alvin Hall.
A Morrisons spokesman said: “We have a large number of staff in the 30s to 50s age group and it is important that they can retire at a time that is right for them. We want a motivated and productive workforce, and therefore having colleagues that can retire when they want to is key.”
Morrisons is providing a similar level of funding to the scheme to that which it has set aside for pensions provisions in the past, the spokesman said.
Union USDAW has welcomed the move. John Hannett, general secretary said: “The announcement by Morrisons that it is to offer our members the opportunity to guarantee their pension fund, when they choose to retire, is something we wholeheartedly support.”
The Morrisons scheme will also tie in with auto-enrolment proposals.