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Quarter of firms to cut pension spend to pay for auto-enrolment

The Association of Consulting Actuaries has warned that 27 per cent of employers are likely to offset the cost of auto-enrolment by reducing their expenditure on workplace pensions.

The ACA’s 2011 pensions trends survey shows this figure increases to 35 per cent among bigger employers, which are expecting between 12 and 17 per cent of staff to opt out of workplace pensions.

Smaller firms are budgeting on between 33 and 39 per cent of employees opting out.

Seventy-three per cent of employers say they are likely to auto-enrol staff into their existing scheme, with 21 per cent saying they are likely to enrol into a new scheme.

At least two-thirds of companies presently offering no pension scheme say they are unlikely to auto-enrol employees into either Nest or an employer’s scheme, suggesting some firms have not understood the legal requirements.

ACA chairman Stuart Southall says: “There is a danger of more levelling-down. With contribution rates into many schemes failing to keep pace with the pension costs of longer lifespans, and with employers expecting and in some cases relying upon high anticipated levels of pension opting out for budgetary purposes, warning bells are ringing.”

Facts and Figures managing director Simon Webster says: “I am not surprised that employers are trying to mitigate the costs of auto-enrolment because this is a tax on business.”

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  1. If the government (or at least the Conservative part of it) were to honour its pre-election promise to undo all the damage done by successive governments over the past 25 years to public confidence in retirement saving, then auto-enrolment wouldn’t be necessary. If the goverment is concerned about encouraging people to save for a private retirement income, then why not promote a private sector solution? As I see it, NEST is just a money purchase substitute for the S2P which employers neither want nor can afford.

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