September 28, 2010
More than half of Britain’s SMEs think government plans which automatically enrol workers into pension schemes will add significantly to business costs, surveys have indicated.
Only 54% of firms with 250 or fewer employees said they supported the policy, with 53% saying they will have a significant impact on their costs, according to the Association of Consulting Actuaries (ACA).
Larger firms with 250 or more employees will begin auto-enrolment from October 2012.
A further 29% of those surveyed said they planned to level down the contributions they made into their scheme to the minimum level required by the government to help cover such additional costs.
But the scope for doing this is limited, as two-thirds of smaller firms do not currently offer their staff a pension.
“The success of the auto-enrolment policy in smaller firms is likely to hinge on how well the economy recovers over the next few years,” commented ACA Chairman Stuart Southall. “The ‘cost of pensions’ to both employees and employers is the ‘big issue’ that has prevented the extension of pension provision to date in the sector.
“While auto-enrolment may break the mould, if we are all still paying higher taxes to recover overspending, it’s difficult to see how this will not bump up opt out rates.
Half of companies said they thought firms employing fewer than five people should be exempt from the new rules, while 61% thought people should have to work for a firm for three months before they were auto-enrolled into its pension scheme.
Between 2014 and 2016 workers at smaller firms will be automatically enrolled into company pension schemes, although they will retain the right to opt out.
Individuals will have to contribute at least 4% of their pay, with companies paying in 3% and the government topping this up with 1%.
But, according to Mr Southall, “much remains to be done in educating the wider public about the importance of private pension saving” while the government’s plans could spell disaster for the economy and SMEs alike.
