Employer attitudes to Personal Accounts
The Department for Work and Pensions (DWP) has today published the findings of research they have commissioned into employer attitudes to the proposed Personal Accounts (aka the National Pension Savings Scheme).
On the face of it it all seems pretty rosy with employers looking to be gung-ho on the whole idea.† Iím not going to make any comment on that other than to say that I canít see any questions that were asked about suitability issues, or employers' money being treated as 'free money', but I donít want to sound like a broken record on that Ė you know my views on the Personal Accounts already.
I thought youíd like to see the results of this DWP research though, so you too can be aware of what information is being fed into this important public debate on the future structure of our pension markets in the UK.† The text of the DWP press release is here:
Today, the Department for Work and Pensions published the findings of research exploring employer attitudes and likely reactions to various aspects of personal accounts. The survey forms part of a wider programme of research and analysis to gather evidence to inform the Governmentís proposals on personal accounts as set out in the White Paper on pension reform published in May 2006.
The report presents findings from a nationally representative quantitative survey of over 2,500 private sector employers in Great Britain carried out on behalf of the Department for Work and Pensions by BMRB Ltd.
The main findings are:
- Overall, 60 per cent of employers were in favour of automatic enrolment. Fifty nine per cent of organisations less than 50 employees said automatic enrolment was a good idea rising to 81 per cent of employers with 250 or more employees.
- A majority (57) per cent of employers said a minimum employer contribution was a good idea. Over half (56 per cent) of companies with less than 50 employees thought a minimum employer contribution was a good idea rising to three-quarters (75 per cent) of companies with 250 or more employees.
- The majority of employers (65 per cent) thought that the proposed minimum employer contribution level of 3 per cent was about right or too little, a quarter (27 per cent) thought 3 per cent was too much.
- Almost three quarters (73 per cent) of employers said that a minimum employee contribution was a good idea and 74 per cent of employers felt that the proposed employee contribution level of 4 per cent was about right or too little.
- When employers were asked how they might respond to an increase in pension contributions, a majority (60 per cent) of employers said they would be most likely to respond through either increased prices (23 per cent), lower wage increases (18 per cent), or through existing overheads (20 per cent). A further fifth (21 per cent) indicated they might re-structure or reduce their workforce. One per cent of respondents spontaneously said they might close down.
- Overall, 72 per cent of employers who offered some sort of pension provision said they were unlikely to make any changes to their existing scheme as a result of the proposals, 14 per cent said they were likely to make changes and 15 per cent didnít know or didnít state whether they were likely to make any changes.
- Of those employers offered some sort of pension provision, one per cent said they were likely to reduce the level of contributions to their existing scheme in response to the proposals, a further two per cent said they were likely to either close or restrict eligibility for their existing scheme. Of those employees who work for an employer with some sort of pension provision, 8% work for an organisation who said they were likely to implement one of these measures. This figure reflects the fact that those who said they were likely to reduce the level of contributions tended to be larger employers.
- Employers were asked how much additional administrative work overall they felt would be involved if the proposals were implemented, compared to what they already do. Almost a fifth (17 per cent) of employers thought there would be a lot of additional work involved, 31 per cent a fair amount, 40 per cent not too much and nine per cent none at all.
- There was support for phasing-in the minimum employer contribution. Almost two-thirds (63 per cent) of employers thought it would be helpful to phase-in minimum employer contributions over time (e.g. employers contribute 1 per cent in year one, rising to 3 per cent in year 3).
- There was less support for phasing in automatic enrolment so that it applied initially only to new employees, less than half of employers (45 per cent) thought this would be helpful.
- Seven in ten (70 per cent) employers thought it would be helpful if automatic enrolment was phased in by size of employer (e.g. giving smaller employers more time). Not surprisingly smaller employers were more likely to think this helpful - 71 per cent of employers with less than 5 employees said this would be helpful compared with only 39 per cent of employers with 500 or more employees.
- A majority (59 per cent) of employers said a national scheme run by a central agency responsible for pension administration and investment was a good idea.
- 81 per cent of employers said low charges were a very important or fairly important feature of the new scheme.
- Over six in ten employers thought the portability of a national scheme held considerable benefits for employees whilst only 17 per cent thought it held considerable benefits for employers.
- Over half (53 per cent) of employers were not in favour of liquidity (allowing individuals to access their pension for reasons other than retirement).
14 November 2006
Source: Department for Work and Pension press release "Publication of DWP research report 379: Employer attitudes to personal accounts: Report of a quantitative survey" 14 November 2006
Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.