New 2012 pension scheme shunned by employers

Monday, 11 May 2009 11:11

Employers will not be downgrading existing pension schemes in favour of the new personal accounts system.

In 2012 all employers will have to provide staff pensions through the new Personal Accounts pensions unless they have other schemes in place – with employees signed up automatically, but able to opt out.

However, there are fears that small firms that already offer pensions would drop them in favour of the less generous Personal Accounts.

A poll of 300 companies by consultants Punter Southall found only two per cent of firms claimed they would offer only the new pension plans.

Some 80 per cent maintained they would keep existing provisions.

With big firms turning their backs on the pensions, it is feared fees for running the pension scheme could rise.

However the Personal Accounts Delivery Authority (PADA) – which is in charge of introducing the scheme – claims large firms were never expected to use Personal accounts.

The pensions have been characterised ‘fish and chip shop pensions’ – aimed at those working in lower paid jobs for smaller businesses.

“We don’t expect huge numbers of companies with existing provision to use us across their workforce – we are designed to complement existing provision,” a PADA spokesperson said.

“A major part of our customer base will come from employers without existing provision. However, the scheme may also be useful for certain groups of workers within larger firms – for example those on short-term contracts or in sectors where there is high turnover of staff.”

The government estimates that over seven million people are currently not saving enough for retirement.

Under the Personal Accounts, some eight per cent of annual salary would be placed into a pension – with contributions from the employee, employer and government.

However, there has been controversy over whether the scheme will benefit all workers – or leave them not getting back as much as they saved, especially those closer to retirement.

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