Just under half of UK employers will level-down their pension schemes in order to meet the cost of auto-enrolment, a survey from the ACA suggests.
According to the study, 41% of employers are ‘likely' or ‘highly likely' to level-down pension benefits in order to meet the cost of additional employees joining the schemes.
However, under half of employees have actually budgeted for any additional costs.
Support for the auto-enrolment scheme is strong, with three-quarters of employers supporting it, but there were several calls for changes to the scheme.
Employees with less than three months' service should not be automatically enrolled, say 75% of employers, and just under three-quarters say minimum pension contributions should be based on a percentage of basic pay rather than full earnings.
NEST itself receives mixed reviews. The scheme is welcomed by 49% of employers surveyed, whilst 22% say existing commercial organizations should fill NEST's role, and 29% disagree with the entire concept of NEST. Employers were split over whether or not to delay the scheme further than October 2012, with 52% in favour.
"Whilst the full cost of auto-enrolling all eligible employees will not hit most organisations until 2017, it is only right that the costs of auto-enrolment, including the administrative challenges, are addressed and tested as soon as possible," says ACA chairman, Stuart Southall.
"Larger employers must act in the run-up to 2012. That is why we have welcomed the review commissioned by the coalition government and have separately made our own recommendations as to how the overall policy can be simplified and improved, taking account of the need to support ‘quality' provision and against the much changed financial backcloth since the reforms were first launched."
The ACA itself made a submission to the government's review of NEST and auto-enrolment.
In its recommendations, the ACA echoes the view of many pension providers that the earnings threshold for auto-enrolment should be higher. The ACA recommends relaxing timescales for auto-enrolment to accommodate difficulty in enrolling employees, and strengthening anti-inducement procedures to stop employers encouraging employees to opt-out.
Spent 56 years at Schroders
Warns on profits
Hargreave Hale seeking legal advice