Just five per cent of small and medium-sized enterprises (SMEs) intend to use Nest as their only scheme for auto-enrolment, new research by Jelf Employee Benefits has found.

At a recent employer seminar, the company found that 76 per cent of the senior HR and finance delegates surveyed plan to use a quality pension scheme aligned with their company branding.

Of those intending to use an alternative to Nest, 73 per cent are likely to use one scheme for all their employees, while the rest will use an alternative scheme for selected groups of employees only.

Jelf Employee Benefits assumes this means that employers are hoping for better employee engagement and lower recruitment and retention costs, as a maximum return for their new legal duties and cost under auto-enrolment.

Jelf Employee Benefits head of benefits strategy Steve Herbert said: “One of the pivotal drivers for employers offering a pension scheme has always been differentiation which supports both recruitment and retention. Yet the kudos of offering a pension scheme has just been removed by the introduction of auto-enrolment, and it follows that an employee is unlikely to be grateful for a company offering one once he or she understands that a pension scheme is now a minimum legal right.

“Therefore the employers that emerge as real winners, in achieving a return on investment post-pension reform, will be those who not only deliver and demonstrate a quality pension scheme, but also embed their company name, livery and values into that offering. The ability to achieve this within NEST is severely hampered by the scheme parameters which are set by legislation and its intended role of a scheme of last resort for any employer who can’t otherwise source a scheme.

“Only time will tell if employers put their money where their mouth is, but it is certainly encouraging that SMEs are considering their options with a view to increasing employee engagement and mitigating some of the costs associated with auto-enrolment.”

However, Nest director of communications and engagement Graham Vidler said they are already working with over 200 employers and have received great feedback from their early users.

"Because of the way automatic enrolment is being introduced, in stages, according to employer size, it’s early days for many employers – particularly small and medium sized companies. Our independent research shows that well over 50 per cent of small and medium-sized enterprises haven’t decided how they will respond to automatic enrolment," Vidler added.

Nest research has shown that for large employers, 21 per cent said they are 'quite likely' or 'very likely' to use Nest for some groups of workers. The majority of large employers said they would use Nest alongside another scheme(s).

Vidler said: "We expect to have between 2 – 5 million members by the end of staging and to work with hundreds of thousands of employers."

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