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Pension auto-enrolment regulations ‘could lead to pay freezes’

 

The new pension auto-enrolment regulations could lead to pay freezes and cuts for employees, a new report suggests.

 

According to research carried out by the Chartered Institute of Payroll Professionals (CIPP), one in six employers say they would offer reduced pay rises or cut them entirely to compensate for the extra costs of running the new auto-enrolment scheme.

 

Furthermore, 1% of the organisations questioned warned that the requirement to automatically enrol staff in a workplace pension could result in job cuts. Another 1% of firms fear that the financial impact of the new regulations could mean they are forced to cease trading altogether.

 

Yet a third of employers said they do not anticipate that the new scheme will have a significant financial impact on their business, largely due to the high number of workers already enrolled in a pension scheme.

 

Under the auto-enrolment regulations, employers will be required to enrol automatically all eligible employees into a qualifying pension scheme and pay a minimum contribution into the fund.

 

The scheme is being phased in from October 2012, starting with larger firms. Smaller businesses will be required to comply by 2018.

 

Commenting on the findings, Karen Thomson, associated director at the CIPP, said: ‘While we absolutely support the Government’s efforts to encourage people to save for their retirement, our research has indicated that pensions automatic enrolment will subject some businesses to financial burdens that could potentially jeopardise the livelihoods of thousands of British workers.’

 

‘Especially during this economically challenging time, making it mandatory for companies to provide pension contributions for all their employees is a lot to ask for and could eat into the profitability of many businesses,’ she added. ‘In some instances, the consequences could be dire – potentially leading to pay and job cuts or, even worse, the closing down of businesses’.