The ACA’s 2012 Smaller Firms Pensions Survey revealed that average contributions by small firm employers and employees had remained static since 2010 with an average of 9 per cent of earnings into trust-based schemes, and 7.5 per cent into contract-based plans.
Authors of the 39-page report, which polled 344 employers with 250 or fewer staff about their workplace pension contributions, warned that the current trend, given lengthening lifespans and lower investment returns in recent years, was “alarming” and would lead to inadequate pension outcomes.
Calling for the government to reduce red tape, national insurance contributions, and income tax to boost contributions, Andrew Vaughan, chairman of the ACA, said: “Our economic path for the next five years will govern how many employees opt out of auto-enrolment pension schemes.
“Ahead of 2018, we need to address firmly how to encourage more people to save much more, so they have a sufficient income in retirement.”
Mr Vaughan also called on the government to raise minimum pension contributions on band earnings to 10 per cent by 2015 and 12 per cent by 2020. He added that a failure to increase the contributions would damage government ambitions to hold down state welfare costs.
Steve Laird, senior partner of Belfast-based Carrington Wealth Management, said: “I can’t see any grand gestures from the government to promote increased pension contributions. People will have to make difficult life choices and save more or they will enter retirement either on the breadline or below it.”
Tim Jones, chief executive of the National Employment Savings Trust, said: “This confirms how important auto-enrolment is for improving the long-term financial outlook of millions of workers. Current minimum contributions won’t produce lavish retirement incomes but will help people afford the little things in life they take for granted now.”