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Third of small firms will level down

One-third of smaller firms say they will reduce pension scheme benefits or close their schemes and move into personal accounts, according to research from the Association of Consulting Actuaries.

The ACA survey of 394 firms with 250 or fewer employees reveals 31 per cent say they will level down.

The survey shows small firms expect opt-out levels by individual employees to exceed 40 per cent, with affordability seen as the principal reason likely to drive the opt-out decision rather than means-testing.

The report also shows 55 per cent of firms say their current schemes fail the personal accounts exemption test.

ACA chairman Keith Barton says: “The benchmark set by the Government may weigh very heavily on smaller firms, particularly if economic conditions are not good at the time auto-enrolment and personal accounts are launched.”

Scottish Life head of pensions strategy Steve Bee says: “What the Government is trying to do is highly dangerous for existing schemes and pension saving in general. The result will be fewer people saving for a pension and those saving will probably be saving less because their employer’s contributions are being reduced. Millions of people working in the UK will live to regret these changes and live on to be poor in retirement.”

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