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Auto-enrolment plans ‘will lead to fall in pension contributions’

A third of employers are planning to cut their spend on workplace pensions in an attempt to mitigate the cost of the forthcoming reforms to the pension regime, a new study has found.

According to the Association of Consulting Actuaries (ACA), one in three larger companies intend to reduce their contributions when the new auto-enrolment rules change in October 2012.

The ACA claims that just over a quarter of employers have budgeted for the cost of auto-enrolment, while smaller employers are expecting 35% to 40% of employees to opt out of workplace pensions following auto-enrolment.

Commenting on the findings, ACA chairman Stuart Southall said: ‘As things stand, there is a clear danger of more 'levelling-down' - a trend which our surveys have identified for some years now.

‘With contribution rates into many schemes failing to keep pace with the pension costs of longer lifespans, and with employers expecting - and in some cases relying upon - high anticipated levels of pension opting-out for budgetary purposes to keep their auto-enrolment costs down, warning bells are ringing.’

However, the Department for Work and Pensions (DWP) has insisted that millions of workers will benefit from the new pension regulations.

‘Automatic enrolment from 2012 will give millions of people the opportunity to save into a pension with a contribution from their employer,’ said a DWP spokesperson.