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Last Updated: Friday, 9 June 2006, 10:56 GMT 11:56 UK
Pension woes 'damaging UK growth'
Pension costs could impair UK economic growth
UK economic growth is being damaged by the high cost of workplace pensions, an industry body has warned.

Christine Farnish, head of the National Association of Pension Funds (NAPF), said firms were diverting investment cash to fund staff pensions.

She added funding pension schemes now accounted for more than 30% of many companies' staff costs.

In response, Work and Pensions Secretary John Hutton promised to cut the regulatory burden on pensions.

"Our objective is not about merely re-writing legislation or tinkering around the edges, but a real drive to cut red tape and to make it easier for you to deliver workplace pensions," Mr Hutton told delegates at the NAPF conference.

He invited the UK business community to explain to him which pension regulations should be abolished.

Unless we can unwind some of the additional requirements imposed on schemes over the years...we face an increasingly unstable situation
Christine Farnish, NAPF

Urgent action

Mr Hutton's pledge may go some way towards allaying fears over future costs of pension regulation.

But according to Ms Farnish urgent action to reduce the burden of regulation is needed.

"Unless we can unwind some of the additional requirements imposed on schemes over the years...we face an increasingly unstable situation," Ms Farnish warned.

She added that pension rules needed to be flexible so that workplace pension schemes could adapt to changing economic and demographic conditions.

A clock face
Some firms are pondering raising scheme pension ages

Sweeping changes

Meanwhile, it emerged that three-quarters of firms are considering introducing sweeping changes to their pension schemes in a bid to cut costs.

The survey from Aon Consulting suggested that the majority of firms are planning to raise staff pension contributions, and more are planning to raise the pensionable age.

The changes are happening quickly, with one in five firms quizzed saying they would raise their workplace pension age within a year.

"Moves of this nature are not popular with employees or with the unions, but they are more tolerated than simply closing the scheme, and are often necessary steps...for the scheme to remain viable," Paul McGlone, head of employer advice at Aon Consulting, said.

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