CBI calls on Government to give businesses more time to make up final-salary pension deficits

The CBI has called on the Pensions Regulator to investigate firms' funding plans for defined-benefit (DB) schemes to allow businesses a longer time frame to fill any deficit, meaning they could use budgets to maintain jobs and invest in the running of business.

The organisation advised the Pensions Regulator to investigate recovery plans longer than 15 years as opposed to the current 10-year trigger. It also called on the Government to re-establish some of the eroded benefits of offering DB schemes and devise legislation to make it easier for employers to adapt to changing circumstances such as change in retirement age.

John Cridland, CBI deputy director general, said: "Even when the economy was strong, longer lives and the loss of key tax incentives had made final-salary pensions very expensive.

"Firms that are fighting to preserve final-salary pensions find themselves punished by regulation and much worse off than firms that offer no pension at all. We cannot allow sound businesses to be dragged down by these pensions, particularly during a recession.

"We need much clearer signs of support from the Government, which hit these pensions again in the last Budget, and from the Pensions Regulator. Longer recovery periods will help firms keep their commitment to pensions without forcing them to divert critical cash flow.

"The Pensions Regulator needs to send a clear signal to trustees by investigating recovery plans longer than 15 years, instead of using the current 10-year trigger.

"Businesses are badly winded by the recession and, when it comes to their long-term pensions issues, they need a bit more time to catch their breath. We cannot rule out large- scale closures of these schemes in the longer term, but these short-term measures will help."