Signifying a heightened level of awareness about auto-enrolment, the 12-page study, Retirement: Not What It Used To Be, which surveyed 1327 IoD members, found that 98 per cent knew of their requirements to automatically enrol staff onto a pension scheme to which the employer had to contribute.
But despite the increased awareness, significant numbers of directors said they were not fully prepared for the workplace pension legislation, a position that could lead to uncertainty, especially among smaller companies where there was the prospect of salary freezes and cuts.
Malcolm Small, senior pensions policy adviser at the IoD, said: “Auto-enrolment is a new challenge for business and we still don’t know how small firms are going to handle the burden.”
Graham Vidler, director of communications and engagement at the National Employment Savings Trust, said:
“Our big challenge, as an industry, is to make sure that workers understand the benefits of employer contribution.”
Key points
■ While 42 per cent of respondents said they would use profits to meet the extra cost of auto-enrolment, 17 per cent said they would freeze salaries
■ A further 7 per cent said they would have to cut salaries to fund the pensions, while 3 per cent said they would have to make redundancies
■ Broken down by company size, 79 per cent of directors at large companies (more than 250 employees) said they were confident, but this figure fell to just 54 per cent at smaller firms (fewer than 50 employees)
■ Within smaller firms, 36 per cent of directors were unsure how many staff would opt out of the pension schemes
Industry view
Tamara Calvert, partner at London-based law firm DLA Piper, said: “These findings demonstrate the challenges that auto-enrolment will pose for smaller businesses in particular, where the business is perhaps less likely to have the support of a strong HR, pensions or finance function.
Adviser view
Andrew Oliver, co-director of Kent-based Andrew Oliver & Co, said: “In my experience, a lot of the smaller companies say they will wait and see how the economy improves, and whether they are still around in three years, so I would agree there is uncertainty.”