NIGHTMARE BILL
Page 48
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If my understanding of the Government's Bill recently published on Social Security Reform is correct, it could in my opinion, become an administrative nightmare for many employers.
As I read it, the change being proposed can be summarised as follows:
1. The Old Pension was based on 25 per cent of the average of the best 20 years earnings. The new scheme will give 20 per cent of the average earnings of the whole of the employees working life.
2. If the employee died, the pension would pass on in full to the spouse. Under the new scheme, the spouse will receive one half of the pension.
3. From 1988, all employees will have the right to contract out in their own name and need not join the employer's pension scheme.
Although points 1 and 2 may not seem significant, the government calculates that overall they will almost halve their bill to provide these pensions. If that is the case, then you can reckon that benefits will also be approximately halved.
By far the most significant point to the employer is that from 1988 each individual will be able to contract out of the government's scheme.
Indeed, the government are offering great incentives for people to do their own thing by way of large reductions in the National Insurance contributions plus additional reductions for those schemes who contract out for the first time between now and 1988. If you took the logical conclusion and you have 20 employees and each employee chose a different insurance company to use for his "contracted out" benefits, it could mean, under my present understanding, that you could have 20 different insurance companies to deal with if your employees decided to pay just one penny more than the minimum required to contract out.
This no doubt accounts for the many reports of the high pressure sales techniques being used by foot-in-the-door insurance salesmen who are already making direct approaches to employees.
I have discussed the matter with our insurance brokers. Unfortunately, because of the complexity of its nature and the fact that employers are not all the same, they find it difficult to lay down standard guide lines as to the best course of action. They do recommend, however, an incentive to encourage a joint approach to the subject by employers and employees.
Possibly my fears are unfounded. I would therefore be very interested to receive the views of others (either direct or through these pages) who are better informed in the matter than I.
D E Allen
Managing director Road Operators Associated Delivery Services Ltd Westgate House 39141 Romsey Road Winchester Hampshire 5022 5BE