CBI Warns Over UK Pensions Black Hole
The CBI has issued a strong warning indicating that the £160bn pensions black hole will damage corporate investment and cut government tax revenues. In a report designed to quantify the economic impact of the growing pensions deficit, the CBI noted that the need for extra contributions will hit profits and hamper company attempts to invest for the expected economic upswing. It ‘conservatively’ estimates that extra company pension payments will total £8bn in 2003, £12bn in 2004 and £16bn in 2005. This would mean total annual contributions would have doubled in just four years to £43bn, according to the CBI. The expected higher pension contributions alone would mean a shortfall in corporation tax receipts of up to £2bn in each of the next three years, owing to the fact that extra company pension contributions are tax deductible, the CBI concluded. It says the impact on UK investment will hamper the pace of economic recovery. Corporate investment is now a key economic driver with consumer spending slowing, public spending already rising rapidly and the world economy sluggish. According to the CBI, this means the UK economy will find it difficult to grow by more than 3 per cent annually over the next three years, significantly below the stronger rates of growth typical of previous periods of economic recovery.