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Pensions consultants Mercer has welcomed the government's proposal to allow automatic enrolment into contract-based pension schemes from 2012.

The company said the decision would be an important move in helping to secure retirement income for employees and a significant step towards giving companies the same rights as those providing trust-based arrangements.

Contract-based workplace pension schemes have become increasingly popular with employers in the past decade and a survey by Mercer in 2007 found that about two-thirds of all occupational pension schemes set up after 2002 were contract-based.

Prior to the government’s decision, it had been feared that EU law blocking auto-enrolment into such contract-based schemes could adversely effect trust-based pension schemes – potentially wiping them out. The recent decision by the EU to make an exception for the UK has been well-received by the pensions industry

Tony Pugh, UK head of DC pension services for Mercer, said: "Organisations that are strategically reviewing their approach to defined contribution pensions should now be able to compare more objectively the merits of trust-based and contract-based arrangements. They can now have more confidence that neither will be regarded more favourably in the context of personal accounts.

"Those employers who already offer contract-based arrangements to their employees now have one less thing to worry about around the impact of personal accounts."

Mr Pugh added: "The majority of employees will benefit from auto-enrolment in contract-based schemes. They will now automatically receive additional employer contributions which they may have lost had they not actively chosen to join their employer's scheme.