A spokesman for the ACA said: "Whilst the ACA and its members are keen to encourage as many employers as possible to contribute to occupational pension schemes, there are real dangers for many scheme members in the government advocating minimum employer contributions, particularly at a low level like five per cent. 

"First, this might set a standard that effectively became the maximum employer contribution, with those many employers presently contributing well over five per cent feeling they should trim back on costs by 'levelling-down' their contributions to that required by government.  This could hasten the trend reported by Turner and ACA surveys towards employers closing existing schemes and opening new schemes with generally lower levels of contributions.  Such a change could be bad news for millions of scheme members.

"Second, low levels of compulsory contributions for some lower paid workers, many women and those closer to retirement might build into only small funds that might mean the income generated on top of the state pension falls below the members' entitlement under the state's pension credit.  In such circumstances, forced pension saving might reduce the taxpayers' forward cost in funding the pension credit, but the recipients might be no better off in retirement. If this happened it would further undermine confidence in the pensions system. 

"Third, compulsory employer pension contributions would endanger levels of employment unless they were phased in slowly and, ideally, accompanied by reductions in other employer costs - such as lower NI contributions - to help finance the change.  Unfortunately, the government has added considerably to employer costs over the last few years and, with its current deficit and spending plans, it is difficult to see how it will reduce costs falling on employers over the next few years.

"The ACA favours new government incentives and a genuinely simplified structure to encourage wider voluntary provision, with employers currently not offering schemes encouraged to establish schemes with benefit levels that they can be afford into the long-term, given demographic changes and likely forward investment returns. Such pensions would best be built on top of a higher state pension (merging the second state pension into this pension) and with pensions drawn at age 68 (moving to age 70)."

Stakeholder Response: Association of British Insurers

Joanne Segars, the ABI’s head of pensions, said: "These findings will confound those who argue that the public does not accept the severity of the pensions challenge or is unwilling to face the consequences.

"The ABI’s proposals, supported by the views of savers and non-savers alike, provide an effective alternative to higher and higher public expenditure on the one hand or compulsion on the other. Adair Turner has set out the problem; today we can see that there is already significant progress towards the solutions."

Stakeholder Response: Occupational Pensions Regulatory Authority