New pension plans should be adapted for temporary workers

The new government-backed compulsory pension programme, due to come into effect in 2012, needs to take more account of temporary workers, it has been claimed.

The Recruitment and Employment Confederation (REC) has argued that the plans for personal account pensions could distort the temporary worker market and lead to confusion for both employers and employees.

Under the plans all employers will automatically enrol workers, who are not already members of a pension fund, into the pension scheme over a 4- to 5-year period, beginning from October 2012.

Contributions from employers will begin at 1 per cent, but by 2016/17 that figure will be 3 per cent, with a further 4 per cent from the employees and 1 per cent in tax relief.

All workers will have a right to opt out of the scheme, which, the REC said, could create administrative strains in the temporary work market where many employees tend to look to maximise their take home pay.

Anne Fairweather, head of public policy at the REC, said: “It is clear that this scheme was designed for a stable permanent workforce. The fluctuations of the agency work market present real challenges.”

In particular, Ms Fairweather highlighted the absence of a common start date for the pensions scheme.

She continued: “The current proposal is for employers to be staged into the scheme by payroll size. This would create significant competitive distortions in the agency work market where the cost of a worker’s wages is crucial. It would also be confusing for workers who would be subject to enrolment in some agencies but not others.”

Ms Fairweather concluded: “The last thing anyone wants is a pension scheme which does not fit with the agency market or which is so complex to comply with that the result is widespread avoidance.”

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