Salaries suffering due to pensions crisis

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Financial Services > Pensions > News

Salaries suffering due to pensions crisis

Mon, 10 Apr 2006

Salaries for people working in the private sector could be suffering due to the pensions crisis as businesses choose to divert money towards pension funds.

According to research from a top city economist published in the Telegraph, businesses are rapidly increasing their social contributions and in doing so they are diverting money away from workers.

Malcolm Barr of JP Morgan told the newspaper that the level of social contributions such as national insurance and pension costs paid by businesses has been raised by 2.5 per cent since 2001.

He said some of this increase was down to the chancellor raising employer NI contributions, but much of it was due to pension payments.

This, he believes, could be having a direct effect at the rate in which employee salaries rise.

"The MPC (monetary policy committee) has cited anecdotal evidence that rising pension contributions by employers may have been part of the reason why wage growth has remained subdued," he argued.

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