Two thirds of small firms do not believe that fewer, larger schemes result in better value for money for savers and for employers according to a survey conducted by the Association of Consulting Actuaries (ACA).

In a survey of 344 smaller employers with 250 or fewer employees, the ACA also found that only a fifth feel that the government should encourage scheme consolidation in the pensions market. Firms with no pension scheme at present are more positive about the value of large schemes however.

Concerning contributions, a third of firms support ‘automatic escalation schemes’ whereby members’ pension contributions increase at a future date, often in line with wage increases, with 22 per cent saying they would consider adding such a feature to their scheme. In addition, 17 per cent said that a ‘money back guarantee’ of members’ contributions at either retirement or death would make a significant difference to employees joining a qualifying default fund run by their scheme.

Firms felt that in order to encourage people to contribute more, the government must reduce National Insurance and Income Tax, and a clearer disclosure of charges is needed. Over the last five years, only five per cent of employers have increased contributions into defined contribution schemes or plans.

ACA chairman Andrew Vaughan said that it will be interesting to see whether attitudes of small firms towards larger pension schemes will change as they start to confront auto-enrolment from 2014 onwards.

“The pursuit of value-for-money pensions, given the combined ‘pressure’ from government, the regulator, possibly the OFT and multi-employer scheme providers, may change the outcome and have a profound impact on the shape of pension provision and its sustainability over the next few years,” he said.

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