By Daniel Hunter
As many as 14,000 businesses with fewer than 30 employees will be faced with the Government’s new pension rules, which come into force today (Monday).
These smaller firms now reach their staging date to automatically enrol their employees in a workplace pension scheme.
The Federation of Small Businesses (FSB) is encouraging businesses to make sure they are aware of this important milestone and understand what they need to do to comply with the scheme.
The FSB wants the Government to continue the support for small businesses to meet the challenge of auto-enrolment.
John Allan, National Chairman, Federation of Small Businesses said: “Auto-enrolment for large and medium sized businesses has been a success so far. However, the extension of auto-enrolment to hundreds of thousands of small businesses presents a major challenge.
“Awareness of the impending changes has picked up, but many have still yet to put into place plans to meet their duties. Small business owners are not pension experts and a significant number will not have any staff saving into an existing workplace pension scheme. These businesses require a clear and simple process, and readily available impartial advice and support.
“Compliance with auto-enrolment must be low cost and entail minimal administrative burden. We still remain concerned that this won’t be the case for many small employers, and that many will face additional administrative as well as payroll costs. It is crucially important that businesses deal with this sooner, and do not leave it until the last minute.”
Small businesses can find more information on the Pensions Regulator’s website.
A separate study by workplace pensions provider, NOW: Pensions, revealed that one in four (27%) of all businesses who are yet to stage haven’t given any thought to how they’ll find a provider.
While this is an improvement on 2014 when four in ten (44%) surveyed said they hadn’t thought about it, it still means that almost 350,000 businesses are unprepared.
Clearly an underestimation of the task at hand is playing a role in this as over half (52%) of those businesses who are yet to stage, don’t think they’ll have any issue finding a pension provider, and only one in ten (9%) are concerned that providers might ‘cherry pick’ business.
A lack of clarity also seems to be playing a role as a third (34%) of the 400 small firms surveyed admitted they don’t understand how auto enrolment minimum contributions are calculated.
Where thought has been given as to how they’ll go about finding a provider, a quarter (26%) intend to seek help from their accountant, 16% are relying on their existing scheme provider, and one in ten (12%) will search the market and do the research themselves.
Morten Nilsson CEO of NOW: Pensions said: “Auto enrolment is fast becoming a reality for thousands of firms across the country and there really is nowhere left to hide. Although it’s tempting to put it off, auto enrolment is complex and the longer you leave yourself to plan, the easier it will be. Business owners need to wake up to the reality that if they don’t get this sorted, they could face fines of up to £500 a day***.
“While most employers are confident that pension providers will be happy to accept their business, the reality is that not all providers will be willing to accept all employers and all employees on equal terms. If you are planning to rely on your existing provider, talk to them early to check they are willing to help.”