The Institute of Directors has called for the Government to postpone the phased introduction of its controversial pension auto-enrolment scheme for two years, until 2014. At present, the plans will see some employees being enrolled onto the scheme from October 2012.

The IoD argues that the new regulation comes at a time when real incomes are being eroded by inflation and that the further reduction in spending power that this will cause is the last thing the economy needs. With many employers currently struggling to offer their employees salary increases, firms may find that these additional employee contributions swallow up any pay rises. When IoD members were asked earlier this year how they would make up the contributions, one third said they would be forced to freeze salaries.

It has also been pointed out that, as employees have the opportunity to opt out of auto-enrolment, many will prioritise income now over future retirement savings. The result would be a failing of the Government’s objective to increase pension saving whilst at the same time burdening employers with unnecessary administration.

Commenting on the Government’s proposed timetable, Simon Walker, Director General of the IoD, said: “This is the wrong time to be implementing pension auto-enrolment. The Bank of England’s downward revision of their growth forecasts for this year and next shows that companies and households are hard-pressed. Real incomes are being squeezed and employers are struggling to offer staff pay rises.”