Many small business employers are failing to offer their staff any kind of workplace pension scheme, while many of those those who do say they are likely to level-down provision ahead of 2012.

New research from the Association of Consulting Actuaries (ACA) has revealed that 80% of the 1.2 million firms who employ less than 250 workers currently offer no workplace scheme.

Almost a third (31%) of firms surveyed said they expect to reduce their pension scheme benefits or to close their existing scheme in favour of personal accounts. This figure rises to 38% among firms employing 50 of fewer employees.

Furthermore, the smallest firms with an existing scheme or with no scheme expect opt out levels by individual employees to exceed 40%, citing affordability as the principle reason for doing so.

Keith Barton, ACA chairman, said: "The survey results are pretty gloomy, especially given the serious economic deterioration in the last few months. Small firms are huge employers of our people and it is right the government is seeking to bring workplace pensions into a sector where they are still a rarity. Auto-enrolment and personal accounts will harness new pension savers, although they are likely to impact on existing schemes and much remains to be done to sort out how they will run."

The 2008 ACA Smaller Firms Pension survey also reported that smaller businesses were struggling to fund pensions in current economic conditions. It found 91% of defined benefit (DB) schemes are now closed to new entrants, up from 18% in 1996.

Barton added: "Pensions in smaller firms are struggling to survive in hostile economic conditions. The majority of defined benefit schemes are in this sector, but the vast majority are now closed to new employees and half to future accrual members. This can be no surprise, given the significant increases in the cost of running such schemes, courtesy of lower investment returns, increasing life-spans and extra regulatory requirements."

The UK's 1.2 million smaller firms employ around 9.6 million people, with over one million of these firms employing four or fewer staff.