Employers may cut back on recruiting new staff to fund auto-enrolment, according to research by MetLife Assurance.
Although nearly two-thirds (63%) of finance directors have not addressed the issue, 16% among organisations with more than five employees said they would cut back on recruitment in order to fund the new legislation.
The research, carried out among 463 businesses, found that this figure rises to 21% among firms that employ between 11 and 50 employees.
Nearly a third (31%) of firms in the retail sector said that they are less likely to recruit new staff as a result, compared with just 11% of construction groups.
Just 2% of finance directors would consider cutting existing pension contributions to fund auto-enrolment.
The research also found that awareness of auto-enrolment is rising among finance directors with 69% of the organisations surveyed aware of the onset of auto-enrolment in October 2012, compared with 55% last year.
Around 11% of finance directors said that auto-enrolment will have no cost effect on their organisation, as they are already compliant, while 12% said that they would absorb the costs.
Around 7% said that the new duty could mean caps or reductions in salaries and bonuses.
Emma Watkins, director of business development at MetLife Assurance, said: “Whilst it is encouraging that finance directors are not looking to cut existing pension contributions to fund auto-enrolment, the fact that so few have considered how to fund this pension provision demonstrates just how easily we defer consideration of pensions.
“Yet as longevity increases and asset returns remain uncertain, it will be critical that savings increase substantially to ensure that we avoid either significant tax increases in the future or be forced to accept that more of our elderly will live in relative poverty.
“Whether the increased contributions come directly from the employee – affecting their ability to spend today – or through the employer, which may be funded through lower wages or a reduction in hiring, it’s clear that a shift to a savings culture is necessary in order to ensure we can live out our retirements with dignity.”
Read more articles on the 2012 pension reforms and auto-enrolment
