Many small businesses will have to close their current pension scheme because they do not meet the exemption tests to the government's compulsory pension plans, an expert report has warned.

The new scheme, which will come into force in 2012, will provide all employees with their own personal account into which employers and employees will be able to contribute.

But a report by the Association of Consulting Actuaries (ACA) found that 55% of schemes offered by small businesses would not qualify as an acceptable alternative to the government-backed personal account.

The most common reason for this was the low level of contribution companies currently made.

"Our survey suggests the benchmark set by the government may weigh very heavily on smaller firms, particularly if economic conditions are not good at the time auto-enrolment and personal accounts are launched," said Keith Barton, chairman of ACA.

"Of particular concern is firms' expectation as to how many of their current pension schemes will fall short of exemption from personal accounts, and the scheme reviews and levelling-down that might therefore occur."

Under the proposals, employers will have to put in 3% of a member of staff's salary into the scheme with employees paying an additional 4%, unless the individual chooses to opt out altogether.

The additional pressure caused by a greater take-up of pensions among staff was likely to lead to many existing schemes being closed down, the ACA said, with 31% saying they would either reduce their contributions or switch to the personal account scheme completely.

Around 80% of small businesses fail to offer a workplace pension scheme at all, the report added.

The government proposals were first announced in December 2006 in the Hutton report and will add extra regulatory and financial burdens to small business owners.