Employers 'in £1bn pension break'

Firms may be storing up problems for the future, the TUC says

Employers have saved more than £1bn over the last five years by scaling back contributions to their company pension schemes, trade unions claim.

The Trade Union Congress (TUC) said that £1.1bn ($1.66bn) had been clawed back by companies since 1997.

Secretary general Brendan Barber said: "Some firms still believe their schemes are robust enough to withstand a break or reduction in contributions."

The TUC report is based on figures from the Inland Revenue.

The TUC added that in 1999-2000 and 2000-2001, when pension problems began to escalate, employers saved up to £100m by cutting or stopping contribution payments.

"Employers were quick to blame stock market failures for the losses which befell their company schemes, yet they forget that in the heady days of the early '90s they took pensions holidays worth billions of pounds," Mr Barber said.

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"Many employers are closing their final salary schemes because they say they can no longer afford them, yet these figures show that many have surpluses which are effectively allowing bosses to run their schemes for free."

The TUC also warned that firms could be storing up problems for the future - saying most companies that halted contributions are now closing their pension schemes.

It also found that individual employees had enjoyed much shorter "pension holidays," as staff had only managed to save £97m since 1997.

The TUC added that the figures show bosses are not passing on the perks of such breaks, as employers normally make double the contributions of staff.

Last week, a separate study warned bosses will have to double their contributions to comply with government rules designed to ensure occupational pension schemes are adequately funded.

Financial consultants Alexander Forbes estimated that annual employer contributions needed to rise from £14bn to £26bn.