Fewer than half of employers said pension contributions should be paid on the first pound earned, showing some resistance to proposed reforms, but most were in favour of saving from age 18. Meanwhile, almost two-fifths of micro employers said they did not communicate pensions to their staff. 

 

The Automatic Enrolment Review 2017 recommended that employees aged 18 and over should be enrolled in a pension, rather than from age 22 as is currently the case. It also recommended to scrap the lower earnings threshold – whereby pension contributions are only calculated from a certain amount, currently set at £6,240 – so that the contribution percentage is applied from the first pound earned. 

 

 

The Employers’ Pension Provision Survey 2019, published on Tuesday by the Department for Work and Pensions, shows that 68% of employers agreed with reducing the age limit for auto-enrolment from 22 to 18 years, though around one in six (17%) disagreed. The survey polled 2,968 organisations.  

 

However, just 43% agreed that pension contributions should be calculated from the first pound earned, and a similar proportion (37%) disagreed, perhaps pointing to concerns about cost. 

 

Most employers said they had absorbed pension contributions – which for many were new as auto-enrolment was phased in until April 2019 – as part of other overheads (68%). More than half (54%) said they had to accept lower profits, and 13% had increased their prices. 

Just 7% said they had implemented lower wage increases. A similar percentage (6%) had changed their existing scheme or reduced or restructured their workforce (5%), and only 1% of employers reduced contribution levels for existing members who had a pension before the introduction of auto-enrolment. 

 

The question of how employers would absorb the cost of any further rises in pension contribution has resurfaced as the Association of British Insurers recently called for 12% minimum contributions, with 6% coming from the employer, double the current minimum level. The Pensions and Lifetime Savings Association also wants to see auto-enrolment contributions at that level, split evenly between employer and employee. 

 

Sir Stephen Timms, who chairs the Work and Pensions Committee, last week acknowledged that employers are currently dealing with increasing national insurance contributions, inflation and difficulties in recruitment. Speaking at an ABI webinar, he said: “I’m sure many would feel the very last thing they need is to pay more in contributions.”  

 

Despite this, he said he believes employers recognise that something has to be done. “We cannot sleepwalk into a situation where millions have inadequate incomes,” Sir Stephen said, even during an economically difficult time, adding: “We just have to grit our teeth.” 

 

To ease the strain, the government should work with employers, giving them “plenty of notice, so they have ample time to arrange and to work out what the implications are for future pay policies”. 

 

 

Not all employers are resistant to the idea of going beyond the status quo. Five per cent of private sector employers with a pension scheme had enrolled at least some non-eligible workers. Among larger employers, nearly half (44%) did so, compared with just 3% of micro firms, mainly because non-eligible staff had asked to be enrolled, but 19% had a company policy to enrol everyone. 

 

Contributions remained at the minimum 3% level on average in 2018-19. Just over one in 10 employers (13%) with a workplace pension scheme was contributing above the minimum in a scheme used for auto-enrolment. 

 

Worryingly, nearly a third (30%) said they had not communicated information about workplace pensions to their employees, rising to 38% among micro employers, compared with only 2% of large and 3% of small and medium-sized employers.