A survey by the chartered accountancy firm, HW Fisher & Company, has found “worrying” levels of confusion and complacency among small business owners about their imminent requirement to start a workplace pension.
Even though 1.3 million SMEs will have to offer a pension scheme to their staff during the next four years, the survey of small companies found that two thirds (67%) of respondents have no idea of their ‘staging date’ – i.e when they must comply.
Nearly a third (32%) felt they don’t know enough about auto enrolment to be able to gauge its likely impact on their business, and almost half (49%) said they understand little or nothing about the changes they will need to make.
Even more striking was the way respondents are preparing – or rather, not preparing – for the arrival of auto enrolment. Fewer than one in four (23%) have taken steps to get ready, with nearly twice as many (42%) saying they know what needs to be done but have yet to start. An alarming 35% admitted they have done nothing as they don’t know how to start. In total three quarters (77%) have still not begun to get ready for the changes.
Those polled gave a bleak assessment of their preparedness for the arrival of auto enrolment. Half (52%) described themselves as “not at all ready”, with a mere 21% declaring themselves “completely ready”.
Yet despite this lack of preparation, there is a surprising level of complacency. 34% of respondents said they are still “hoping for the best”, with a further 24% feeling “completely confident”.
However a clear majority of those polled expressed concern about the likely cost – in both time and money – of setting up a company pension scheme. Three in 10 (30%) said they were worried about the set-up costs, with twice as many (62%) fretting about the ongoing expense of making employer contributions to staff pensions. Nearly half (47%) said they feared the extra admin involved in managing a pension scheme.
Sailesh Mehta, partner at HW Fisher & Company, comments: “So far auto enrolment has only affected Britain’s larger firms, but for the army of small business owners it is just around the corner.
“So it’s worrying that so many of them are burying their heads in the sand – auto enrolment is coming for everyone, and if you run a business, it’s coming for you.
“From August firms with more than 60 PAYE employees will have to comply, and by this time next year thousands of firms with fewer than 30 staff will have to offer their employees a pension.
“The smaller the company, the later the staging date – but this is no reason to ignore your obligations. The earlier you start to prepare for auto enrolment, the easier the transition will be.
“The Pensions Regulator has pledged to write to employers 18 months before their staging date, and when you get the letter, you shouldn’t delay. Choosing an auto enrolment scheme and bedding it in can take several months, and you should get expert financial advice to help you pick the right scheme for your company.
“But it’s equally important that you plan for how you will meet the extra cost of making pension contributions for your staff. By 2018 employers will have to pay at least 3% of basic pay per employee into a pension scheme. But the pension contributions you make will also lower your National Insurance bill – so it’s essential that you seek advice in order to budget accurately.”