Small businesses with fewer than 30 employees could face being turned away by pension providers for auto-enrolment schemes.

Research from financial researcher Defaqto found three quarters of advisers anticipate that growing numbers of pension providers will not offer auto-enrolment schemes to businesses with 30 employees or less.

Of the 248 advisers questioned, one third (33%) already believe there isn't enough pension provider choice for employers implementing auto-enrolment.

82% said that providers have been cherry picking auto-enrolment business.

Morten Nilsson, CEO of NOW: Pensions, which commissioned the research, said: "For many providers, the effort involved with administering these schemes won't be worth it.

"Widespread cherry picking is already occurring, but as smaller firms reach their staging dates, it's likely that growing number of providers will close their doors altogether."

The research found that of the auto-enrolment schemes that advisers have written so far, guaranteed acceptance was the most important factor, cited by nearly one third (30%), closely followed by the level of charged cited by 29%.

More than two thirds (67%) of advisers surveyed expect to see a growing number of pension providers introducing an employer charge for auto-enrolment, with 69% claiming that a charge would not necessarily deter them from recommending a scheme.

Morten Nilsson, said: "Auto enrolment is working, but its biggest challenge is yet to come.

"Owners of small firms will have little or no experience of pensions and will be fitting auto enrolment in around their other day to day responsibilities – it's these firms that are going to need considerable help both setting up their schemes and with ongoing administration."

NOW: Pensions is one of a small number of pension providers willing to accept all employers and employees.

It is committed to ensuring there is "choice in the market", Nilssen said.

First published 27.08.2015

Lindsay.sharman@wilmingtonplc.com