By Daniel Hunter
The numbers of small businesses contributing more than the minimum to workplace pensions has nearly doubled in the past year, according to NOW: Pensions.
Of the 400 small and medium-sized enterprises (SMEs) surveyed, nearly one in three (30%) say they plan to, or will consider, contributing more than the legislative minimum when they enrol their employees into a workplace pension. This compares to nearly one in five (17%) of SMEs surveyed last year.
Of those that intend to be more generous, 17% say they plan to pay more than the minimum from the outset with a further 13% stating that they will pay the minimum initially, with a view to increasing contributions over time. This is an improvement on 2014 when 8% of SMEs surveyed said they intended to pay more than the minimum with a further 9% stating they will pay the minimum initially with a view to increasing contributions over time.
Waking up to the benefits of a more generous pension
Over half (57%) of those surveyed who intend to pay more than the minimum say they believe it will help with the recruitment and retention of employees. One in two (51%) hope that by contributing more, their employees will be encouraged to do the same. Over a third (39%) think the minimum contribution has been set too low for a comfortable retirement. Nearly a quarter (24%) say they don’t offer any other benefits so are happy to spend a bit more on providing a more generous pension while an equal proportion believe it is the employer’s
responsibility to ensure employees have a healthy pension pot that will provide them with a comfortable retirement.
Of all the companies surveyed, 43% say they think offering a good quality pension helps with employee retention while a third (34%) think it helps to improve the attractiveness of the company to potential employees.
Morten Nilsson, CEO, NOW: Pensions said: “The perception is that large firms offer more generous pensions than small companies but, this isn’t necessarily true. Many small employers want to offer their staff a benefit they’ll genuinely value and are willing to put their hand in their pocket to do so.”
Compliance top of the agenda
Of the 44% of firms that plan to make minimum contributions, over a third (36%) say it is because their focus is on ensuring compliance. While a similar percentage (32%) claim they want to keep things simple and think paying more would complicate matters, while nearly a quarter (24%) say keeping costs low is a priority. An honest 16% say they don’t really want to offer a pension at all so plan to keep costs as low as possible.
Nilsson added: “There’s a danger that, because the government has set the contribution level, employers will assume that auto enrolment minimum contributions are sufficient to provide a comfortable retirement for their workforce.
“The reality is that even when auto enrolment is fully rolled out, a combined pension contribution of 8% still isn’t going to be enough for most people. If employers contribute even a small amount more than they are obliged to do, this can make a big difference to employees’ final pension pots.”