Main content

One in two SME employers (49%) predict National Pension Savings Scheme changes will result in levelling down or closure of company pension schemes

The research was undertaken by Mori on behalf of Barclays Financial Planning amongst a sample of 200 small to medium sized businesses (SMEs). Those responsible for company pensions and benefits were asked prior to today’s announcement of their awareness of the NPSS changes. Those who knew of the changes predicted the impact that the NPSS will have on employer pension provision. The findings show:
  • More than one in two employers are unaware of the NPSS proposals - 41 per cent claim that they have heard about the proposals but know nothing about them, while 15 per cent have never heard of them.
  • Of those who know at least a little about the plans:
    • 27 per cent believe that employers will continue to provide pension schemes at the current level
    • 31 per cent feel that employers will continue with their current pension plans but look to contain costs as they reduce their contributions in line with the Government’s proposals
    • 18 per cent believe that employers will close their current schemes and join the NPSS
  • Currently, just 24 per cent) of pensions schemes have near full take-up (95-100 per cent) of membership by eligible employees. Nearly one in two (44 per cent) have a take-up of less than half of eligible employees.
  • One in five employees (19 per cent) currently makes no contribution to their company pension. Under the NPSS they will now be expected to pay four per cent of their salary.
Stephen Ingledew, Director, Barclays Financial Planning comments, “Our research shows that many businesses are completely unaware of the changes and therefore unprepared for introducing the National Pensions Savings Scheme to their staff. The scheme will have invaluable benefits in increasing employee contributions. However, as our research highlights, there is a strong danger that employees currently participating in their company pension scheme will see a decrease in the contributions made by their employer. I would urge companies to take note of the changes and use the lead time until they are implemented to realise the financial and motivational benefits for their workforce of a good company pension scheme.” About the National Pensions Saving Scheme The National Pensions Saving Scheme comprises a new system of Personal Accounts which the Government is to introduce in 2012, as proposed last year in the Turner report. Under the changes: · All companies must offer auto-enrolment in the scheme for their employees, unless they offer auto-enrolment into their own occupational pension schemes and such schemes meet certain “minimum standards”. · Companies will have to make compulsory contributions on “Band Earnings” i.e. (approx £5,000 - £33,000) of three per cent of salary to the NPSS, with employees paying four per cent and the Government one per cent via basic rate tax relief. The employer contributions will be phased in over three years, but the Government will consider a longer phasing-in period for smaller businesses. · Self-employed individuals and also non-workers will be able to join the scheme on their own account. Case Study Under the changes, a company with 100 employees and a payroll of £2.5m currently not offering a pension scheme could experience increased costs of approximately £60,000 per annum. If the company offered a scheme which has 50% employee take-up, it could face additional costs of approximately £30,000 when all employees join under the proposed auto-enrolment rules. ENDS