Fact Service January 2013

Issue 1

Employers may cut pensions contributions

Nearly one in three employers has considered reducing contribution levels to defined contribution (DC) pension schemes that are used for auto-enrolment, according to research by Aon Hewitt.

Its survey found that more respondents are considering lowering contribution levels for non-pension scheme members than in 2011, when one in seven were considering this option. This could be due to a desire to control the cost of complying with auto-enrolment.

The research also found that respondents are planning to use their existing DC pension scheme for auto-enrolment purposes.

James Patten, head of benefit design at Aon Hewitt, said: “This year’s results suggest that the vast majority of employers are likely to use their existing DC vehicles as their main arrangements for auto-enrolment.

“Many employers looking to lower contribution levels for auto-enrolment purposes are therefore likely to be doing so within their existing schemes. Given the complexity of implementation, it may well be that some employers are simply reluctant to change vehicle if it means adding further difficulty to the implementation process.”