Around a third (31%) of employer respondents say the reduction in pensions tax relief and complexities of the workplace pensions regime have caused employees on higher incomes to leave their pension schemes, according to research by the Association of Consulting Actuaries (ACA).
The research, which surveyed 477 employers responsible for more than 620 pension schemes, also found that 81% of respondents are concerned about the amount they are spending on pensions.
The research also found:
- 43% of respondents aim to spend 6% or less of payroll on pensions.
- 13% of respondents believe that if pensions were taxed like individual savings accounts (Isas), with a top-up from government during accumulation, pension saving would be boosted.
- 82% of respondents expect that the typical age of retirement will be 66-67 by 2020, and 36% expect the typical age to rise to 68-69 by 2028.
- 20% of respondents who currently run defined benefit (DB) pension schemes open to future accrual, say they will close their scheme following contracting-out ending in April 2016.
- 85% of respondents would like the government to establish an Independent Pensions Commission to make periodic recommendations on pension policies.
- 70% either support or see value in the government encouraging employers with small defined contribution (DC) arrangements to merge into larger multi-employer schemes.
David Fairs, chairman of the Association of Consulting Actuaries, said: “In assessing the challenges ahead, we believe the government needs to have a joined-up strategy ready to address the potential danger of rising opt-outs as employers, particularly small and micro-employers, and their employees react to the increase in minimum contributions in now April 2018 and 2019.
“For the majority of employers this is still shortly after their staging date for auto-enrolment and lands in the middle of sizeable projected increases in the living wage. And, importantly, as this report points out, there needs to be a great deal of care taken before further pension tax changes are made; any reform must genuinely simplify the regime for both employers and employees and, above all, must genuinely incentivise pension saving as opposed to simply raising tax revenues.”