More than 50% of small to medium employers are unaware of the proposals for personal accounts and what it will mean for them, claims new research from Barclays Wealth.
Following the publication of the pensions white paper: ‘Personal accounts: a new way to save’ on Tuesday, Barclays has revealed the findings of a survey of 200 SMEs conducted in October.
The research, carried out by Mori on behalf of Barclays Financial Planning, shows 56% are unaware of the personal accounts proposals, with 15% never having heard of the scheme, and 41% saying they had heard about the proposals but did not know the details.
Of the remaining employers who were aware of the proposed scheme, which includes a compulsory employer contribution of 3% of an employee’s banded earnings, 31% believe the scheme will result in levelling down.
Although 27% believe employers will continue to provide pension schemes at their current levels, another 18% believe the personal accounts system will cause employers to close their current schemes and join the new national scheme which is scheduled for introduction in 2012.
Barclays suggests this could be down to the added expense of auto-enrolling all employees into a pension and having to make compulsory contributions, as it points out under the changes an employer with 100 staff, a payroll of £2.5m and currently no pension scheme, could see their costs rise by around £60,000 a year.
And even employers who already offer a pension scheme but only have around a 50% take-up could see their costs rise significantly as Barclays says auto-enrolling all employees could cost £30,000 a year.
Stephen Ingledew, director of Barclays Financial Planning, says the research shows many businesses are unaware of the changes and therefore unprepared for introducing personal accounts to their staff.
He adds: “The scheme will have invaluable benefits in increasing employee contributions. However there is a strong danger employees currently participating in their company scheme will see a decrease in the contributions made by their employer.”
Meanwhile the Conservatives have also expressed their concerns over the detail of the personal accounts white paper, suggesting the increased contribution limit could exacerbate the threat of levelling down.
Nigel Waterson MP, Conservative Shadow Minister for Pensions, says the white paper raises almost as many questions as it answers, particularly on the issues of levelling-down and means-testing.
He says: “The raising of the 'cap' to £5,000 could well accelerate the process of levelling down for existing schemes. There are also major concerns about the level of means-testing remaining after these reforms are implemented. And that could only serve to increase the number of people on lower incomes who will be auto-enrolled but may be no better off.”
“There is still much to be done to make personal accounts workable,” adds Waterson.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
Partner Insight Video: Advisers have had to adapt to the changing investment landscape.
Investment trust savings scheme