The automatic enrolment into a pension scheme, due to come into force in 2012, may impact small businesses the most. The Federation of Small Businesses (FSB) fears that the true administrative costs are incredibly high and may cost small business up to £2,550, per year

Due to new regulation, all firms and their staff will have to be fully enrolled into a pension scheme from 2017, and business owners will be expected to pay a minimum of three per cent of an employee’s salary into a pension.

As a result, the average small firm – those with four employees earning an average salary of £25,000 – will pay at least an extra £2,550 per year in administration and pension costs.

The Government has said that it will cost micro firms with up to four employees £46 per person in administration. The FSB believes this is a gross underestimation and is urging the Government to publish an impact assessment immediately.

The FSB has urged the Government to make micro firms exempt from the automatic enrolment scheme, as it will cost them in both time and money and is extremely disappointed they have ignored their concerns.

The FSB calls for the Pensions Regulator to adopt a light handed approach when the rules are put in place before any financial penalties are enforced, and to clearly and effectively communicate to small businesses how the new regulations will affect them and what will be required.

Mike Cherry, Policy Chairman, Federation of Small Businesses, said:

“It is vital that everyone is able to save for their future but the automatic enrolment scheme is going to cost the smallest businesses dear. While Government has put measures in place to make the enrolment process easier for micro firms, it is going to cost them at least an extra £2,550 a year. The true administrative costs, however, are unknown and could be extortionate. We are calling on the Government to publish a proper impact assessment immediately to shed the true light on just how much these changes will cost small businesses.”