Large drop in the number of private sector firms providing pensions

The percentage of private sector employers making some form of pension provision plummeted from 41% in 2007 to 28% last year, according to new research from the Department for Work and Pensions (DWP).

The survey of more than 2,500 firms also revealed that just 27% of private sector employees were active members of work-based pension schemes, with 13% of employees belonging to occupational schemes. Only 9% of non-providers expected to introduce pension provision in the next five years.

The most commonly cited reasons for non-provision were: the organisation was too small (36% of non-providers); pension provision was too costly (15%); and staff did not want it (13).

Workplace-based stakeholder pension schemes continued to be the most common form of provision, provided by 23% of all firms. Five per cent provided group personal pensions, 5% made contributions to employees’ personal pensions, while 2% provided occupational schemes. Less than 1% made contributions to employees’ private stakeholder pensions.

From October 2012, employers will be forced to automatically enter employees into a workplace pension of a minimum standard, under the National Employment Savings Trust (NEST) scheme.

The DWP estimates that the reforms will result in between five million and nine million people starting to saving more. This includes increasing the pensions of more than a million people in workplace schemes who are currently getting between nothing and 3% – which will be the new employer minimum contribution towards staff pensions – from their employers.

TUC general secretary Brendan Barber described the survey results as “truly shocking”.

“Everyone knows about the switch from defined-benefit to usually much less generous defined-contributions pensions, but the real pensions crisis is in the retreat from providing any kind of pension at all,” he told Personnel Today.

“The only way to make up the gap is through auto-enrolment and it’s imperative that the Government’s review does nothing to undermine comprehensive coverage.”