A third of larger employers are looking to cut their spend on workplace pensions ahead of auto-enrolment, according to research by the Association of Consulting Actuaries (ACA).
Out of the 468 employers surveyed for the 2011 Pensions trends survey, just over a quarter have budgeted for the cost of auto-enrolment.
The larger employers that have budgeted for the costs are expecting between 12-17% of employees to opt out of workplace pensions after being auto-enrolled.
Smaller employers are budgeting on between 33-39% of employees deciding to opt out. Just under three-quarters (73%) of employers say they are likely to auto-enrol all employees into their existing workplace pension scheme, with 21% saying they are likely to enrol all employees into a new scheme.
However, 27% of employers say they are likely to review their existing pension benefits to mitigate the cost of higher scheme membership in anticipation of additional costs arising from auto-enrolment, with this rising to over a third (35%) among the largest employers.
Stuart Southall, chairman of the ACA, said: “The results of our latest 2011 Pension trends survey are alarming in a number of ways.
“They point to a rising trend among employers of all sizes to review existing pension arrangements and, given the economic climate, for a goodly number to seek ways to reduce their pension costs.
“It appears the austerity message has been grasped by many private sector employers as they begin to focus on the potential costs of pension reforms around the corner from 2012.
“This is understandable but, with not much more than a third of private sector employees now in pension arrangements and with many of these set to deliver very modest retirement incomes, the survey findings are disappointing in terms of the need to boost rather than diminish retirement incomes into the future.”
Brendan Barber, general secretary at the Trades Union Congress (TUC), said: “Employer contributions are modest and are being phased in over five years. There is no need for employers to level down, and unions will be vigilant in ensuring this does not happen in workplaces where we organise.”
For more articles on auto-enrolment and the 2012 pension reforms