Just 17% of organisations would be able to afford a mandatory increase in employer auto-enrolment pension contributions with minimal impact to the business, according to research by consultancy Barnett Waddingham.
Its survey of 500 senior UK HR professionals and business leaders also found that more than a third (36%) of respondents would reduce or remove employee benefits within the business as a result.
In addition, more than two-fifths (22%) would look to actively reduce their headcount in response, while 31% would freeze hiring entirely. A further 17% of respondents said their business would be at risk of insolvency if higher employer pension contributions were to be mandated.
Martin Willis, partner at Barnett Waddingham, said: “With pension adequacy a growing concern nationwide, and millions of people at risk of falling short of even a minimum level of income in retirement, solving the ticking timebomb of the UK pension system must be top of the Government’s agenda. The current minimum overall contribution rate of 8% simply isn’t enough for people to achieve a comfortable retirement.
“However, as our findings show, even a small increase to contributions could have an adverse effect, disrupting businesses, stalling hiring, and, in some cases, threatening people’s livelihoods. These findings highlight the financial tightrope many businesses in the UK are still walking, exacerbated by the national insurance hike and long-term wage inflation.
“As the Pension Commission begins its long and complex journey to address vital areas of our pension system, it’s crucial that the Government looks at levers both within pensions and beyond. We need a balanced, sustainable approach that strengthens retirement outcomes for individuals while safeguarding the financial resilience and continuity of UK businesses.”
