Employers looking to cut their pension costs

A third of larger employers are looking to cut their spending on workplace pensions in anticipation of extra costs when staff are automatically enrolled into workplace schemes next year.

A survey by the Association of Consulting Actuaries (ACA) found that only one in four employers had budgeted for the cost of auto-enrolment.

The study of more than 460 employers also revealed that larger firms expect up to 17 per cent of staff to opt out of workplace pensions after the change next year, rising to 39 per cent in smaller organisations.

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More than one in four employers said they were likely to review their pension benefits to mitigate the cost of higher scheme membership, rising to over a third among larger employers. Most workers not in a scheme said they could afford to or were disillusioned with pensions, said the report.

ACA chairman Stuart Southall said the results of the survey were alarming, adding: “They point to a rising trend amongst employers of all sizes to review existing pension arrangements and, given the economic climate, for a goodly number to seek ways to reduce their pension costs.”

He went on: “With not much more than a third of private sector employees now in pension arrangements and with many of these set to deliver very modest retirement incomes, the survey findings are disappointing in terms of the need to boost rather than diminish retirement incomes into the future. As things stand, there is a clear danger of more levelling-down.”