Government must help smaller firms with PAs - UPDATED

The trade body’s 2008 smaller firms pension survey – released today – revealed a third of respondents planned to reduce pension scheme benefits or close schemes in favour of personal accounts.

The survey – of 394 employers with 250 or fewer workers – also found the smallest firms with or without existing schemes expect to see opt-out levels of around 40pc. Affordability was cited as the main reason for opt-outs.

ACA chairman Keith Barton told PP: "If the government sticks to its current proposals its needs to start advising smaller businesses in particular on what they need to be doing to prepare for it.

"They need to look very carefully at communication. There needs to be more focussed help for small employers on how they can minimise the disruption personal accounts will cause."

Barton also said the government should consider implementing an age cut off point to help workers aged 55 and over avoid falling into the means-tested benefits trap.

"There is a lot of concern that employees are going to find it difficult to deal with and they will opt out because of means-tested benefits. This is probably something the government should be looking at again."

The ACA said the UK’s 1.2 million smaller firms employ around 9.6 million people. However it found around 80pc of these firms currently offered no workplace pension scheme.

It also found 55pc of schemes run by small businesses would fall short of the personal accounts exemption test – with more than 60pc paying lower contributions than personal accounts would require.

And more than 90pc of the defined benefit schemes run by smaller firms are closed to new entrants with half closed to future accruals.