02 August 2006
The Department for Work and Pensions has published the findings
of research exploring employer attitudes to automatic enrolment
into personal accounts.
The Department for Work and Pensions (DWP) has published
Research Report no. 371: Employer attitudes to personal accounts:
Report of a qualitative study. This study forms part of a programme
of research and analysis to gather evidence to inform the
Government's proposals on personal accounts as set out in the White
Paper on pension reform published in May 2006.
The main findings from in-depth, face-to-face, interviews with a
range of employers show:
- Strong support for automatic enrolment across all types of
employers - this would encourage saving for retirement, help
overcome inertia and increase the take up of pensions. This finding
is borne out by findings, already published in the Government's
White Paper on pension reform, which show that a majority (60%) of
employers are in favour of automatic enrolment.
- Employers supported the idea of a portable pension account
which employees would take with them when they moved
employers.
- There was general consensus among employers that the balance of
employee and employer contributions proposed by the Pensions
Commission was acceptable (four per cent post-tax employee
contribution, three per cent from the employer, and one per cent
from the state as tax relief).
- Employers' views on the idea of a 3% minimum employer
contribution varied. Some thought it was about right or even too
little. Similarly, findings, published in the Government's recent
White Paper on pension reform, indicate that a majority of
employers (57%) think that a requirement for a minimum employer
contribution is a good idea.
- Others, particularly smaller employers and those not
contributing to a pension scheme, expressed concerns. Employers
with concerns about a minimum employer contribution of 3% felt that
phasing in the level of employer contribution over time would allow
for financial planning.
- Small employers also supported the idea that the scheme should
be phased in by employer size with them being the last to
comply.
- In general, employers suggested they would respond to a
requirement of a 3% minimum employer contribution in three main
ways - absorb additional costs through profits; pass costs on
through increased prices; or pass costs through to wages. There was
limited mention of re-structuring and only a few employers
mentioned the possibility of business closure.
- There was little evidence in this research of the prospect of
"levelling down" of existing pension provision in response to the
Government's proposals. Employers currently operating pension
schemes with an employer contribution of 3% or more reported they
viewed their pension scheme as an important recruitment and
retention tool that they would want to keep.
- Overall, smaller employers and those with a low take up of
their existing pension scheme favoured the proposal for a National
Pension Savings Scheme as it was perceived to be the most
straightforward and to minimise the role of the employer. By
contrast, larger employers, particularly those with a high take up
of their existing scheme, wished to retain their own schemes
arranged directly with providers.
