Postpone auto-enrolment for two years, says Institute of Directors

The professional organisation said it was the "wrong time" to implement auto-enrolment. Postponing the phased introduction of the reforms for two years would give businesses more time to prepare and avoid undermining weak consumer spending, it said.

Between October 2012 and September 2016 employers will have to start auto-enrolling their workers into a pension scheme which meets minimum requirements. Employers will be required to automatically enrol 'eligible jobholders' aged between 22 and the State Pension age who are earning more than £7,475 a year.

Carolyn Saunders, a pensions law expert with Pinsent Masons, the law firm behind Out-Law.com, pointed out that the current auto-enrolment timetable already extended until 2016 for smaller employers.

"Because of longevity trends and the decline in defined benefit schemes, it is vital for individuals to start to assume greater responsibility for their own pension provision sooner rather than later. With the majority of the UK's working population employed by smaller employers it will be some years, even under the current proposals, before many are impacted by the auto-enrolment requirements," she said.

In its statement, the IoD said that one third of its members would be forced to freeze employee salaries to make up mandatory employer pension contributions.

It added that, with real incomes being "eroded by inflation", employees were likely to opt out of the scheme in order to prioritise income over future retirement savings. The policy would therefore be unlikely to increase pension saving, while "loading employers with unnecessary administration", it said.

Last week the Bank of England revised its growth forecasts for this year and next downwards. Simon Walker, director general of the IoD, said that this showed the current pressure on household and company finances.

It was not too late for the Chancellor to postpone the scheme as part of next week's Autumn Statement, he added.

"A few months ago when we asked, one in five of our members did not even know the legislation was coming into effect from next year. If the Government defers auto-enrolment at next week's Autumn Statement, it will have done so before most businesses have even considered the impact of the new rules," he said

"Those businesses that have begun preparations and wish to press on should be able to do so voluntarily. However, forcing businesses into auto-enrolment from 2012 would be counterproductive."

Pinsent Masons's Saunders said that the introduction of auto-enrolment challenged the current 'spend today' culture into "one of saving for tomorrow".

"As the IoD has identified, this challenge is particularly acute in the current economic environment," she said. "However, the Government cannot afford for auto-enrolment to fail - and introducing auto-enrolment at a time when many businesses and employees are struggling financially is a high-risk strategy."