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3 January 2011
Last updated at 21:16 ET
Two-thirds of small firms do not offer their employees a pension, while many that do are not providing sufficient contributions, research suggests.
Most defined contribution pension schemes are failing to keep pace with the contributions necessary to cover longer life expectancy, the Association of Consulting Actuaries (ACA) said.
All companies will have to offer staff a pension by 2016.
But the ACA said small firms expect 35% of employees to opt out of the schemes.
The group said defined contribution pension schemes run by small companies are attracting combined employer and employee contributions of less than eight per cent of earnings.
By October 2017, the government has stipulated that contributions must be at least eight per cent, with a minimum of three per cent from the employer, plus four per cent from the employee, with the remaining one per cent coming from tax relief.
But the ACA said contributions needed to rise well above this minimum level.
"Pension contributions into most schemes reporting to this survey need to double on average to 15% of earnings if reasonable retirement incomes are to be achieved," said the group's chairman, Stuart Southall.
'Financial incentives' Of those firms that did not offer a pension scheme, 96% said the reason was cost.
Employers also said that of those staff that did not join the company pension scheme, 84% did not do so because of cost.
"The smaller firms covered by this survey - so important to the UK economy in terms of employment and innovation - seem particularly needful of financial incentives to kick-start sufficient levels of pension saving," Mr Southall concluded.
The ACA surveyed 404 small firms, with 250 or less employees.
Online Business Consulting | Internet Business Consulting
Most defined contribution pension schemes are failing to keep pace with the contributions necessary to cover longer life expectancy, the Association of Consulting Actuaries (ACA) said.
All companies will have to offer staff a pension by 2016.
But the ACA said small firms expect 35% of employees to opt out of the schemes.
The group said defined contribution pension schemes run by small companies are attracting combined employer and employee contributions of less than eight per cent of earnings.
By October 2017, the government has stipulated that contributions must be at least eight per cent, with a minimum of three per cent from the employer, plus four per cent from the employee, with the remaining one per cent coming from tax relief.
But the ACA said contributions needed to rise well above this minimum level.
"Pension contributions into most schemes reporting to this survey need to double on average to 15% of earnings if reasonable retirement incomes are to be achieved," said the group's chairman, Stuart Southall.
'Financial incentives' Of those firms that did not offer a pension scheme, 96% said the reason was cost.
Employers also said that of those staff that did not join the company pension scheme, 84% did not do so because of cost.
"The smaller firms covered by this survey - so important to the UK economy in terms of employment and innovation - seem particularly needful of financial incentives to kick-start sufficient levels of pension saving," Mr Southall concluded.
The ACA surveyed 404 small firms, with 250 or less employees.
Online Business Consulting | Internet Business Consulting