UK companies fear cost burden over auto-enrol pensions
More than half of small firms think Government plans to automatically enrol workers into pension schemes will add significantly to their costs, a survey indicated today.
Only 54% of firms with 250 or less employees said they supported the policy, with 53% saying they will have a significant impact on their costs, the Association of Consulting Actuaries warns.
A further 29% of companies also said they planned to level down the contributions they made into their scheme to the minimum level required by the Government to help cover the additional costs they will face.
But the scope for doing this is limited, as two-thirds of smaller firms do not currently offer their staff a pension.
Half of companies said they thought firms employing less than five should be exempt from the new rules, while 61% thought people should have to work for a firm for three months before they were auto-enrolled into its pension scheme.
Between 2014 and 2016, workers at smaller firms will be automatically enrolled into company pension schemes, although they will retain the right to opt out.
Individuals will have to contribute at least 4% of their pay, with firms paying in 3% and the Government topping it up by 1%.
Six out of 10 firms said they would not just auto-enrol new staff, but would also put existing ones who had not joined their pension scheme into it. But firms expect around 35% of staff to opt out of their pension scheme.
Firms claimed the reasons staff did not join their pension scheme were cost, a preference to spend their money, and disillusionment with pensions.
ACA chairman Stuart Southall said: "The cost of pensions to both employees and employers is the big issue that has prevented the extension of pension provision to date in the sector.
"Whilst auto-enrolment may break the mould, if we are all still paying higher taxes to recover over-spending, it's difficult to see how this will not bump up opt-out rates."