Employers’ enthusiasm for pension auto-enrolment plans wanes

Employers have given government plans for automatic enrolment into a workplace pension scheme from 2012 a lukewarm reception.

A government survey of 2,550 private sector employers found that about half supported the proposals, which will require employers to automatically enrol all eligible workers aged between 22 and state pension age into a qualifying workplace pension scheme, unless the worker chooses to opt out.

After being told what their obligations would be under the workplace pension reforms, the majority (56%) of employers said that they considered them a good idea. However, this proportion had fallen since 2007 (64%). More than one-third (37%) of employers thought the reforms a bad idea – an increase on 2007 (26%).

According to the Department for Work and Pensions, which carried out the research, seven million people are not currently saving enough to deliver the pension income they are likely to want, or expect, in retirement and 2.5 million fewer employees are saving in a private sector occupational pension than in 1995.

The vast majority of employers already making pension contributions of 3% or more expect to maintain or increase their level of contribution when they have to provide pensions for all their staff. Most workers who are eligible also support the reforms, and say that if they were automatically enrolled they would expect to stay in a scheme.

An independent review of how to make auto-enrolment work for employers will report back in the autumn.

The findings come as the Pension Protection Fund (PPF) today announced plans to be financially self-sufficient by 2030. The pension lifeboat fund said that the target would be met by a combination of investment returns, proceeds from the assets of schemes brought into the PPF, and by continuing to collect an annual levy from eligible occupational pension schemes.

National Association of Pension Funds chief Joanne Segars said she hoped that there would be a balance between a prudent route to self-sufficiency and an “overly cautious approach that saddles firms with higher levies”.

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