Prudential denies Nest will cut pension payments

INSURANCE giant Prudential has played down fears that employers will downgrade their pension provision when automatic enrolment into workplace schemes begins next year.

It was confirmed in the Pensions Bill last week that companies will have to enrol employees into their own pension scheme or, if they don't offer one, into the new National Employment Savings Trust (Nest) under plans being phased in from 2012. Employers will have to pay just 3 per cent of salary towards an employee's pension under Nest, less than most currently contribute.

Groups including the Association of Consulting Actuaries claim large firms will slash their contributions once auto-enrolment begins.

But Edinburgh-based Barry O'Dwyer, deputy chief executive for Prudential in the UK and Europe, told Scotland on Sunday that workers would not let employers get away with cutting contributions.

"The threat is that employers will take the opportunity to level down their provision and move employees into Nest, but discussions with employers suggest they don't see it as a great opportunity to cut costs," he said.

"Levelling down won't happen to the extent suggested because people are more aware of their pension now and know what their employer is paying in."

O'Dwyer, formerly of Standard Life and HBOS, said the reforms would boost the pensions industry.

"Nest will mean savings increase, and in the long term that means more people have more savings and are more engaged with financial services," he said.