By Francesca James
Almost two-thirds (65%) of the UK’s small businesses are no nearer to enrolling their staff in a workplace pension scheme required under new legislation, according to a new report from the Chartered Insurance Institute (CII) called “Advice Needed!”.
The research, conducted among 500 firms with up to 49 employees, shows that 42% have not thought about the new regulations for automatically enrolling staff in a pension scheme. In addition, nearly a quarter (23%) – though considering the regulations – are yet to take action.
Most businesses of this size (59%) know little or nothing about the pension reforms – which begin to take effect for large firms from October 2012 – with only 12% claiming to know a lot about them and a mere 8% having an implementation plan in place. Such low levels of knowledge and activity may reflect the now extended pension reforms’ “staging dates” — from June 2015 to April 2017 — stipulated for the UK’s smallest businesses.
Currently, 6 out of ten firms employing fewer than 50 staff do not offer their employees a workplace pension scheme, with just 27% making a provision for both full and part-time staff. And the gap between small firms (10-49 staff) and micro businesses (1-9 staff) is stark, with 65% of the latter offering no pension scheme at all.
The research shows that financial advice could be key to successful implementation. Of those companies (13%) that have already begun the planning process by seeking external assistance, more firms (46%) have chosen to consult a financial adviser rather than their accountant, pension provider or the Department for Work and Pensions.
David Thomson, director of policy and public affairs at the CII said:“To be fully prepared for the pension reforms, businesses need to decide what pension scheme they will offer their employees, how they will initiate and administer the scheme and how they will advise employees on pension saving.”
“And though implementation is not supposed to be complex our research shows that firms could benefit from engaging a financial adviser at the earliest opportunity to ensure the auto-enrolment process runs smoothly and with minimum disruption to business. Early employer engagement will also be important to help boost employee participation and contribution rates”
Under the pension reforms, all employers will be obliged to automatically enrol staff into a pension scheme, make contributions on their behalf, register with The Pensions Regulator and inform employees how the changes will affect them.
And though the Government has extended the staging dates of the reforms for firms with fewer than 50 employees on their PAYE scheme, they still need to start planning and budget to comply with the new rules
David Thomson adds: “Our research shows that companies are more likely to turn to financial advisers for both choosing an employee pension scheme (48%) and for help in setting it up and running it (39%).
“Consequently, we would recommend using findanadviser.org or consulting a local, Chartered financial planner specialising in pensions.”
Thomson emphasises the importance of business owners getting the right advice and making the best informed decisions to ensure the success of the new pension arrangements for their staff.
“Businesses need to embrace the concept of auto-enrolment rather than view it as another squeeze on their revenue. We believe that getting the right professional advice will be crucial in ensuring that small firms ultimately become advocates of the workplace pension reforms.”