There is more woe for the Government comes as it emerges that National Employment Savings Trust (NEST) scheme and other reform plans have fallen out of favour with employers and employees.

The latest Workplace Pensions report, which compares views on employee benefits issues in the UK workplace between now and 2006, shows that support among employers for the pension reform plans, which include in implementation of auto-enrolment from 2012, has halved to 26 per cent, from 52 per cent in 2006. Smaller firms recorded the lowest support.

Companies that are able to absorb the costs and comply with the plans have fallen by seven points, and as a result, 19 per cent of employers say they will reduce employee numbers, a figure three points higher than 2006.

However, fewer companies said they would be using the NEST scheme as an excuse to level down on pension contributions - 21 per cent of employers will level down to three per cent of salary.

Companies also believe that they have not received sufficient information on the NEST initiative, particularly among smaller schemes, and 47 per cent of larger firms feel they are adequately aware of the reforms.

For employees, a reduction was found in the number of employees who would consider taking their contribution above the set level of four per cent in NEST.

"We expected that support would have grown for the pension reform proposals, but our new findings do not make good reading for policy makers," commented Steve Folkard, head of pensions and savings policy at AXA Life. "Support from employers has plummeted since 2006 and many are still contemplating levelling down or reducing head count to manage a higher cost base. Dignity in retirement is a genuine issue and we are concerned as to what level of benefit will be provided - particularly in the early years of the scheme before the full contribution levels are reached. The successful implementation of NEST will require much better engagement with employers and employees with more effective information and support programmes."

Folkard reiterated the general feeling in the industry, that the successful reform of the system must be a key objective of the incoming government. "We would urge policy makers to take heed of these findings and to work with the pensions industry early in the new parliament to develop a strong taskforce approach to ensure successful delivery of pensions reform and the implementation of NEST."

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