A major survey of pension trends in companies of all sizes, published today, has found widespread disquiet about how the Government’s reforms to introduce personal accounts could impact on existing pension provision.

Many employers fear the reforms will lead to a general levelling-down of pension contributions, more closures of existing schemes and a growing divide between those in ‘good’ pensions and those offered lower-cost arrangements.

This growing pension apartheid within the private sector builds on that already developing at pace between private and public sector employments.

The survey, conducted by the Association of Consulting Actuaries (ACA), early in 2007, collected responses from over 330 employers with scheme assets exceeding £127 billion and over 2.1 million members. This first report on the findings concentrates on pension reform issues. Read more: Personal Accounts Q&A.

Whilst a majority of employers (59%) believe the State pension reforms being passed into legislation this year will provide a better platform upon which to build private pensions, there are much greater doubts about the developing shape of personal accounts and policy towards occupational pensions.

“The survey results underscore the dangers of the law of unintended consequences. All too often over the last 20 years, well-intended legislation has led onto damaging consequences for good existing pension provision,” says Ian Farr, ACA Chairman.

“Whilst the idea behind personal accounts is laudable – extending pension coverage to more employees – it is clear from these findings that many may lose out unless great care is taken.”

A clear majority of employers (68%) expect the introduction of personal accounts to lead to a levelling-down in employer pension contributions as firms struggle – particularly smaller firms – with the costs of paying contributions more widely. However, presumably on grounds of opposition to further prescriptive regulation, three-quarters oppose placing a restriction on annual personal account contributions of less than £5,000pa.

Three-quarters (76%) say the proposed pension reforms will also lead to an increase in the number of closures of better workplace schemes as employers rationalise their forward pension arrangements in response to the reforms.