Small firms split over auto-enrolment

Just over half of small firms support auto-enrolment but 53% say it will “add significantly to costs”, the ACA says.

According to the ACA 2010 Smaller Firms' Pensions Survey, only one in five small firms has started preparations for auto-enrolment, which is due to include SMEs in 2014.

Almost a third of small firms plan to level-down their contributions in order to offset the additional cost of new members joining their schemes. A fifth say they will close their existing scheme and enroll all employees into NEST.

More than a third of firms expect employees will opt out of the new pension scheme, citing cost, disillusionment with pensions and a preference to spend as the main  reasons.

"The success of the auto-enrolment policy in smaller firms is likely to hinge on how well the economy recovers over the next few years," says Stuart Southall, ACA chairman.

"The cost of pensions to both employees and employers is the big issue that has prevented the extension of pension provision to date in the sector.

"Whilst auto-enrolment may break the mould, if we are all still paying higher taxes to recover over-spending, it's difficult to see how this will not bump up opt-out rates.

"Much remains to be done in educating the wider public about the importance of private pension saving to boost retirement incomes and the need to make room for higher levels of savings in spending plans."