By Claire West
The British Chambers of Commerce (BCC) has today published a hard-hitting new report, which highlights a number of business concerns with looming pensions reforms.
The report is informed by BCC research, undertaken with the organisation’s membership after the recession, to uncover the impact that the Pensions Act 2008 will have on business and the UK economy when it is implemented between 2012 and 2016.
The business group identifies four key problem areas for business:
•A small firm staged in for auto-enrolment 12 months before another small firm that it actively competes with, will face approximately £960 more in contribution costs than the firm that is staged later. Businesses, regardless of size or sector, see this competition impact as an issue for them.
2. Pension Scheme Administration
•The vast amount of administration that businesses will have to deal with will include both one-off set-up processes and recurring paperwork.
•Costs to set-up the pension scheme, particularly for businesses with no in-house experience or expertise in this area, will be very high.
•The biggest administrative burden for many firms with high staff turnover will be processing new starter enrolments, opt outs and refunds.
The BCC recommends that employees should not be auto-enrolled into a pension scheme until their thirteenth week of employment.
3. The Employment Relationship
•A recurring concern was how the reforms would affect the relationship between an employer and their employee. Business experience suggests that for many workers, their payslip will be the first they know of their new pension scheme — or the first they know of their mandatory contribution. This may create potential issues.
•The problems that auto-enrolment will cause are aggravated by the requirement to re-enroll employees every three years.
4. Risks to the employer generated by the Pension Act 2008 obligations
•New employment obligations will always create a new route for vexatious employees to make claims against businesses; new areas for well meaning businesses to get it wrong; and, opportunities for unscrupulous businesses to gain a competitive advantage. In reforms as complex and alien to business as these, the risks are even higher.
•The current penalty regime is harsh. A flat rate fine of £400 can be levied by the regulator for any form of non-compliance, including innocent procedural mistakes.
BCC recommends cutting the base fine of £400 for any violation to £125 — in line with similar HMRC penalties — for those companies which unintentionally fall foul of regulations, or which are victims of vexatious claims
Commenting on the report, David Frost, Director General of the BCC, said:
“Chambers of Commerce have been supporters of auto-enrolment as a means to boosting retirement income. However, the complex web of regulations that were passed at the beginning of 2010 is not what was expected when the concept was first proposed four years earlier.
“Businesses cannot be expected, nor can they afford, to act as an administrator to make the Pensions Act 2008 run smoothly. Both the set-up and running costs of the reforms are too high, and there is a real risk that, combined with the other employment regulations due to commence in the next few years, they could damage job creation.”