Government's new pension scheme shunned

Updated: 

Georgie Gillard/PA Wire


A new survey has revealed that only 2 percent of employers plan to use the Government's new workplace pension scheme.

Businesses that don't currently have access to a pension scheme are being offered an option set up by the government. But the survey, conducted by consultants Aon Hewitt, has revealed that the vast majority of them will choose not to take up the offer.

Larger businesses will have to automatically enrol their staff into a pension from October 2012, as companies are gradually phased into the new system over the next four years.

The survey, which covered 110 companies of varying sizes and across a number of industry sectors, found that only 2 percent of respondents plan to take up the government's National Employers Savings Trust (NEST) scheme. The vast majority of firms will instead be using alternative pension arrangements.

James Pattern, of Aon Hewitt explained that: "where possible many companies prefer to use existing vehicles to limit the amount of change required."
The survey also suggested that many companies looking to minimise change have decided not to lower their existing pension contributions to meet the new minimum rates set out by the Government. This will see employers contribute 3 percent of salary, Government 1 percent and employees 4 percent of salary – unless the employee opts out of the scheme.

Mr Pattern said; "More good news is that almost all respondents that have reached a decision on the matter expect to give new hires access to the same DC contribution structures as existing pension savers."
He explained that sticking to existing contribution levels would reduce the workload firms faced moving to auto-enrolment, but would also increase their costs.

There are concerns though that if a significant number of businesses do shun the NEST scheme, it may face significant funding issues.
NEST chief executive Tim Jones told The Telegraph that the scheme was already working with more than 100 employers who had signed up to a pilot run, and that their feedback had so far been positive.
Mr Jones told the newspaper; "We expect to have between two million and five million members by the end of staging and to work with hundreds of thousands of employers. While research like this is always of interest, it doesn't reflect our current experiences with employers."

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