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ACA says 41% of larger employers considering levelling down

The Association of Consulting Actuaries has warned that 41 per cent of larger employers are considering levelling down existing pension arrangements due to auto-enrolment.

The ACA’s findings contrast with recently released research from the Department for Work and Pensions downplaying this risk.

Last month the Department of Work and Pensions released survey results revealing that 94 per cent of employers contributing at least 3 per cent say they will maintain or increase levels for existing members, while 81 per cent say they will offer existing contribution levels or higher to non members and new employees.

But in its own findings, the ACA points out that the DWP’s findings were based on research conducted in the summer of 2009 and mainly covered smaller employers. The ACA’s survey was conducted in July and August of this year. The ACA points out that the DWP survey found only one in 10 employers in its sample already run schemes meeting the minimum contribution requirements of the forthcoming reforms and that the scope for levelling-down pensions amongst smaller employers is therefore very limited, particularly as two-thirds do not currently run a pension scheme.

The ACA says: “The DWP survey finding that ‘most employers already making pension contributions of three per cent or more expect to maintain or increase their level of contribution when they have to provide pensions for all their staff’ therefore only relates to those 1 in 10 employers surveyed a year ago already contributing at this level.”

Standard Life head of pensions policy John Lawson says: “Large employers with contributions well above the 3 per cent mark are likely to level down.”

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