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The Federation of Private Business has hit back against the government's proposals to prohibit employers from providing incentives for staff to opt out of personal accounts.

The federation said its members were already struggling under red tape and said the additional administration and costs inherent with paying 3 per cent of their worker's earnings to a pension scheme "could be extremely harmful".

Phil Orford, chief executive of the Federation of Private Business, suggested this be a decision to opt-in based on their ability to afford a pension scheme benefit.