Auto-enrolment awareness 'very low' among small employers

A department for work and pensions research report on the likely responses of small employers to personal accounts is not “happy reading”, a lawyer warns.

Understanding small employers' likely responses to the 2012 workplace pension reforms: Report of a qualitative study gives a detailed forecast of what bosses could do when faced with auto-enrolment and personal accounts.

The aim of the research was to understand small employers' likely reaction to the reforms, the effect it will have on their administrative systems and how they will cover the cost of this and the monthly contributions

It found there was a "very low" awareness of the reforms among all the small employers.

The report said: "Employers in this study thought that they were unlikely to take any action until about 12 months prior to implementation.

"This was generally underpinned by the view that the reforms were a long way off, and that they may be subject to change or perhaps not be implemented at all given the economic climate at the time of the study."

Nabarro partner Anne-Marie Winton explained: "It appears that ‘small' employers - those with less than 50 employees - are ill equipped to deal with the personal accounts regime. Few are even aware of it.

"Cutting to the heart of the problem is the fear that in a recession, adding to employers' costs is just not feasible. The alternatives suggested included cutting pay, reducing hours and even making staff redundant."

She added: "Unsurprisingly, small employers also thought that employees would rather have pay than pensions savings, so would choose to opt out.

"This means that we could end up in effect with hundreds of thousands of empty personal accounts (much as was experienced with stakeholder plans)."