UK - More than 40% of employers are considering levelling-down their pensions because they are concerned about the costs of auto-enrolment, the Association of Consulting Actuaries (ACA) has said.

Conducted as part of the ACA's submission to the ongoing review on auto-enrolment, the survey asked employers their opinion on the upcoming regulation, with 70% saying it seemed complex.

Stuart Southall, chairman of the ACA, said the full cost of auto-enrolment would not become clear until 2017, but that it was right for its administrative challenges and true costs to be tested as soon as possible.

"Larger employers must act in the run-up to 2012," he added.

The organisation suggested a shorter staging period than the current five years, which, it argued, would reduce the risk of levelling-down, as well as increase the earnings threshold before employees get auto-enroled.

Currently, 41% of survey respondents said the legislation was likely or highly likely to result in levelling-down in existing schemes.

However, the respondents, part of 210 companies with £166bn in assets under management, overwhelmingly supported the principle behind auto-enrolment, with 75% in favour of the plans.

While most were in favour of no single part of the legislation, 29% of respondents disagreed with the establishment of the National Employment Savings Trust (NEST), while a further 22% said existing providers could assume the role given to NEST.

Additionally, 60% believe employers with fewer than five workers should not be required to auto-enrol, while almost two-thirds of respondents thought the requirement to re-enrol people who opt out every three years should be removed.

In other news, two out of every three pounds paid into defined benefit schemes go toward paying off deficits, a study of FTSE100 companies by KPMG has revealed.

The survey, which looks at data from last year, further found that only 3% of the top 100 companies now had pension funds without a deficit, up drastically from 2007, when one in five could still make that claim.

Mike Smedley, a pensions partner at the consultancy, said that while the figures may look alarming, they were a result of the economic environment,

"The key message to sponsoring companies, pension fund trustees and regulators is to maintain a long-term view and avoid knee-jerk reactions," he said.

"The most important thing in securing the future of pension provision is to secure the future of the business, not the other way round."

KPMG said almost all companies could solve their funding shortfalls, if discretionary cash flow included capital expenditure and dividends for three years, leaving only 3% with a deficit.

However, as the economy recovers and businesses strengthen, Smedley said it was important for trustees to "support the competitiveness of their employer and its ability to access finance".

He added: "This will include recognising capital providers are essential to business success and the right balance needs to be struck around pension funding."

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