36per cent: The number of pension schemes of small firms in jeopardy

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The Independent Online

The introduction of government-sponsored personal accounts in a few years' time could prompt many employers to close their workplace pension schemes, the Association of Consulting Actuaries (ACA) has warned.

Under the new system, employers, employees and the Government will pay into individual workers' pension plans. The idea, outlined in the recent Pensions Bill, is that companies will contribute 3 per cent of salary, staff 4 per cent and the Government 1 per cent. All workers who are not in a more lucrative workplace scheme will be automatically enrolled into a personal account.

In a recent ACA survey of employers and their pension arrangements, 36 per cent of firms with fewer than 250 staff said they might close their existing schemes, choosing instead to pay into the new system. These findings will add weight to the argument that personal accounts could lead to a "levelling down" of workplace pension provision, with some companies likely to reduce the amount they pay into their employees' plans to a level close to that set out for the new personal accounts or simply close their schems altogether.

Meanwhile, there are signs that the introduction of personal accounts, originally planned for 2012, could be delayed as the system may be taking longer to set up than anticipated. In a BBC radio interview, Tim Jones, chief executive of the Personal Accounts Delivery Authority, said there was a "possibility" that the 2012 date could slip. Mr Jones also said the percentage of salary that employees would be expected to pay in the first year after the accounts were introduced would be just 1 per cent, rather than 4 per cent. By allowing employees to start off with a low contribution, it is hoped that fewer people will be tempted to exercise their right to opt out of personal accounts.

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