UK - Employers in the UK would back greater compulsion to save for a pension if the government’s current pension reforms fail to check the decline of occupational pensions.

A survey of more than 300 companies by the Association of Consulting Actuaries (ACA) found that three quarters (76%) would support the introduction of minimum compulsory private pensions contributions from employees and the self-employed and two thirds (66%) would support the introduction of minimum employer contributions

The UK government has set up a Pensions Commission to look at voluntary pensions saving and considered whether there is a need for greater compulsion. Most of the survey (91%) expect the commission to recommend greater compulsion within a few years.

The survey found that although defined benefit (DB) schemes predominate, 72% are closed to new entrants and future accruals. Only 7% of employers think that proposals in the government’s pensions green paper will reverse this decline.

Only one in four employers think the removal of requirements to offer limited price indexation and spouses’ benefits will extend provision or that simplifying contracted out benefits will help.

However, 69% of employers support the replacement of a minimum funding requirement (MFR) with a scheme-specific funding requirement, and 76% support the idea of a more pro-active pension regulation to replace the current pensions regulator, Opra

The main reason for closing DB plans to new members is the increase in pensions costs, chiefly because of lower real investment returns and greater longevity. The ACA survey found that average employer contribution rates in to DB schemes have increased from 11.5% last year to 13.1%this year and are continuing to rise sharply.

In contrast, employers’ contributions to defined contribution (DC) schemes have hardly risen at all, from 5.1% last year to 5.2% this year. Contributions to DC schemes generally are not offsetting the effect of worsening investment returns.

Only 31% of employers offering the new stakeholder DC plans are making any contribution at all, and take up has been disappointing. Although 28% of the employers surveyed offer stakeholder plans, fewer than 1 % of employees of companies covered by the survey have joined stakeholder schemes and 46% of stakeholder schemes have no members at all.

However, employers do applaud the government’s plans to simplify the taxation of pensions. Two in three (68%) say proposals in the tax simplification paper will ease scheme administration. Gordon Pollock, ACA chairman, comments: “What our survey showed is that whereas employers were pleasantly surprised at the innovative way pension taxes are to be simplified, they felt the green paper itself under-performed. The government can do more.”