Firms still not ready for pension reforms

Nearly a third of FTSE100 companies are not prepared for pension reforms due in 2012, a survey by Watson Wyatt claims.

The actuary’s research, 2009 FTSE100 Defined Contribution Pension Survey, showed that of those that have made preparations, 12% said they would have to increase employer costs, and 12% said they expect to change their definition of pensionable earnings. Only a quarter of respondents said that no changes would be required.

The survey showed that schemes with auto-enrolment, which become mandatory in 2012, achieve significantly higher take-up than those without it.

More than half (55%) of respondents have a take-up rate of over 90% of employees to their defined contribution (DC) schemes.

Despite the fact that among those companies using auto-enrolment, 90% achieve the nine-out-of-ten take-up rate, the survey showed that just 39% of DC schemes are using it. 13% of companies had a take-up rate of less than a fifth of eligible employees.

Paul Macro, senior consultant at Watson Wyatt, said: “A significant minority of pension schemes currently have a very low take-up rate, and the switch to auto-enrolment, combined with mandatory employer contributions, will have a major impact on payroll expenditure.”

The survey also found that average total maximum employer and employee contributions to DC pensions rose to 15.3% last year.