Workplace pensions 'under threat'

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Some small firms' pension schemes will be under threat when a new government system is introduced in 2012, according to a survey.

The Association of Consulting Actuaries (ACA) quizzed 309 firms about the future of their pension schemes.

Some 41% of companies with fewer than 250 staff were considering swapping their own schemes with new Personal Accounts that could be less generous.

From 2012, workers will be enrolled in a pension unless they opt out.

This will apply to workers aged over 22 and earning more than £5,035 a year. The system is not expected to be fully in place until 2015.

Consultation on the plans - which would see automatic enrolment start for different groups of workers on an assigned date at some point between October 2012 to October 2015 - was launched by the government on Thursday.

Under the proposals, if a company pension is not available, workers can be automatically enrolled in the government-backed Personal Accounts.


The message is clear - good schemes are falling under threat from these well-intentioned reforms
Keith Barton, ACA

Under this scheme, an employee puts in a minimum of about 4% of their salary into the scheme,

Their employer will eventually contribute a minimum of 3%, although this will start at 1% in the three years from 2012, rising to 2% for another year and then up to 3%. There is also tax relief worth another 1%.

"While we support the government's ambition to encourage wider pension coverage through auto-enrolment and Personal Accounts, the survey highlights the complete absence of a coherent plan to support existing quality schemes," said Keith Barton, chairman of the ACA.

"The message is clear - good schemes are falling under threat from these well-intentioned reforms."

Extra costs

The number of employees who are members of a firm's pension scheme is expected to increase when auto-enrolment starts, creating extra costs for employers who contribute to these schemes.

More than half of employers in small firms who were asked said they would revise their pension benefits to offset the increased cost of automatically enrolling staff into an existing scheme in 2012.

But a spokesman for the Department for Work and Pensions said: "There has been a market failure to provide pensions for moderate and low earners, our reforms will result in between six to nine million people saving in a workplace pension, many for the first time.

"The Personal Accounts scheme is designed to complement not compete with existing pension provision. We want to get the details right and keep costs low."