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.”