LONDON (Citywire) - A large majority of companies have little confidence in recent regulatory changes or the proposed introduction of personal accounts, according to a survey of scheme administrators by Capita Hartshead.
The government plans to introduce personal accounts in 2012, at which point employees will be automatically enrolled into the schemes. Employees will have to contribute a minimum of 3 percent of earnings of between 5,000 and 33,000 pounds.
Government and employer contributions will bring the overall contributions to 8 percent. While one third of companies interviewed already auto-enrol their employees into pensions schemes and 54 percent plan to auto-enrol employees once personal accounts legislation is introduced, a significant number of existing schemes are expected to suffer as a result.
More than a fifth of companies said they would probably cut benefits or abandon their schemes completely if personal accounts are launched. And the better schemes on the market are expected to be worst affected by accelerated closures and reductions in employer contributions.
Confidence levels in regulations introduced to improve and simplify pension schemes in the last five years were also low. Less than one third of companies said that the changes had been beneficial for either schemes or the pensions industry as a whole.
Around 90 percent of schemes say that changes have not improved take up, simplified administration nor made scheme more attractive.
Two thirds (66 percent) said the changes have not improved financial security - a key aim of the Pensions Act 2004.
But 74 percent say that the cost of managing their pension scheme has grown at a faster rate than any other business overhead over the last five years due to increases in professional fees, costs of compliance and changes in long term care assumptions.
The survey also found that while 64 percent of employees have defined contribution schemes, 59 percent of final salary schemes have closed to new members.
c Citywire Financial Publishers Ltd 2007.