Survey from Association of Consulting Actuaries finds 93% of employers believe green paper will not encourage greater pensions provision
Some 93% of employers surveyed by the Association of Consulting Actuaries (ACA) believe the proposals for pensions reform contained in the Government's green paper are inadequate and will not encourage greater provision for occupational pensions.
The survey of 208 firms taken in February 2003 also found 95% of respondents feel state pension reform needs to be included in the final reform proposals when they are released later this year.
The ACA said the need for pension reform was reflected in the survey's finding that 29% of employer respondents had reviewed their pension arrangements in the past six months.
During the same period, a further 17% of employers had decided to close their final salary schemes to new entrants, bringing the proportion of final salary schemes now closed to new entrants or future accruals to 72%.
'If this pace of change continues, there could be fewer than 15% of final salary schemes open to new entrants within two years,' ACA chairman Gordon Pollock said.
However, there is employer support for government proposals to simplify pension taxation, with 68% of respondents saying the measures in the green paper will make administration easier.
In addition, some 69% of employers surveyed said they support the principle of the lifetime and annual contribution limits for tax relief purposes. However, respondents generally favour increasing the proposed lifetime limit from £1.4m to £2m and the annual contribution limit from £200,000 to at least £250,000.
Some 55% of respondents said the lifetime limit will cause problems with senior staff and executive provision, necessitating scheme redesign, while 87% of employers surveyed want the proposed limits for tax relief indexed to earnings.
With regard to the timing of regulatory change, 69% of respondents favour 6 April 2005 as 'A' Day, the date the new tax rules will be introduced, but 43% said the 6 April 2004 is achievable.
Combined employer and employee contribution rates into final salary schemes are rising, up from 15.8% during the previous survey in August and September 2002 to 17.6% of earnings in February 2003, according to the ACA.
This mostly reflects increased employer contributions, although 6% more schemes have successfully called for higher employee contributions over the past six months.
'However, there are few signs of increase among contributions into money purchase schemes, which are generally around half the size of those made into final salary schemes, despite lower investment and annuity returns,' Pollock said.
The ACA also found more employers are considering lower-cost defined benefit schemes, such as career average schemes, which can better protect those on lower incomes than money purchase.
Pollock is not cheered by the survey results. 'Far fewer employees are being offered occupational pensions than a decade ago and our survey found only around 1% of employees have taken up stakeholder plans,' he said. 'The flight away from final salary arrangements has accelerated disturbingly over the past few months.
'What is clear is that employers and members need as much help as they can get from the Government to support occupational provision. The immense value of a sizeable employer's contribution in building a good pension cannot be underestimated. This is why the Government's reform proposals are so important and why they must be improved upon.'
Pollock called for more radical measures to allow schemes to reduce forward liabilities or be run at lower costs, as well as better incentives for employers who offer an occupational scheme with a significant employer's contribution.
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