(UBS Pensions series 29) Barriers to pension scheme participation in small and medium sized enterprises

Large sections of the UK population are failing to make adequate provision for their retirement, and one area where provision is notably poor is amongst people working for small and medium sized businesses. We use information gathered from interviews with individuals from a wide range of organisations active in the pensions market for these companies to shed light on the particular barriers to pension scheme participation in this sector in which over 40% of the working population is employed. We find that many finance directors are sceptical of the benefits of providing pensions for their employees and deliberately structure their pension schemes to avoid high participation rates. We also find that financial advisers and pension providers are reluctant to promote pensions in companies where they perceive the management to be unsupportive and where there is no clear profit margin. We suggest one way in which management could be motivated to encourage pension scheme participation amongst their employees.