Currently two thirds of small businesses do not have a pensions scheme for their staff. This is all set to change as new business rules are set to be introduced in 2012 which will force small business to enroll their employees into a pensions scheme, workers will have to contribute at least 4% of their pay to a scheme, with companies paying in 3% and the government adding another 1%. Yet 84% of smaller firms said the cost would put them off, while two-thirds thought their staff were disillusioned with pensions.
North London Chartered Accountants and business advisers Berg Kaprow Lewis LLP are warning business owners that new rules requiring almost all employees to be automatically enrolled into workplace pension schemes could prove costly for smaller firms.
Managing partner Brian Berg said: “Under the plans, due to be phased in between 2012 and 2017, employers will normally have to enrol their staff into a scheme unless they explicitly opt out, with the employer then paying in the equivalent of three per cent of the individual’s salary”.
The government has claimed that, for a small firm employing four people, the administrative cost would be just Ã‚Â£46 per person, but the Federation of Small Business (FSB) has dismissed the figure, claiming a firm with four employees would end up paying an extra Ã‚Â£2,550 per year in administration and pension costs.
The FSB has called for very small employers to be excluded from the scheme, and for the Pension Regulator to take a ‘light touch’ approach to enforcing the rules.
It has also demanded that the government conduct a full impact assessment immediately, to get a more accurate picture of the true cost of the reforms to small businesses.