ONE in five companies says it would have to cut jobs if compelled to pay money into workers' pensions, research shows.

More than a third of companies said they would only be able to meet the cost of compulsory contributions by freezing salary increases, while 31 per cent said they would have to pass on the cost to customers by raising prices.

The survey of 800 businesses by the British Chambers of Commerce (BCC) found many firms already found pensions too expensive to offer.

More than half of the companies questioned said they did not contribute to their pension scheme because they could not afford it, rising to 74 per cent among firms employing fewer than 50 people.

BCC director general David Frost said: "These findings show that forcing employers to contribute towards pensions would come at a high price, both for businesses and their employees.

"Compelling employers to pay into pension schemes would simply increase the cost of employing someone and it is clear that some firms would be forced to reduce the size of their workforce to meet this cost.

"At a time when our companies are facing fierce competition from countries such as India and China, compulsory pension contributions are the last thing that UK employers need."

The group is calling on the Government to introduce a financial incentive to encourage companies to make pension contributions.

The BCC also wants the Government to do more to encourage individuals to save towards retirement.

Mr Frost said: "We now need to see real measures to encourage more people to pay into pensions.

"This means better government-led information for employees about the benefits of pension saving, greater use of automatic enrolment in company pension schemes and a simpler state pension system that complements individual saving rather than discourages it."