Survey results released this week by the Association of Consulting Actuaries (ACA) suggest that surprisingly few small businesses have begun to prepare at all for the coming pension reforms. So far, only 20% have started to investigate what the changes will mean for their business.
Beginning October 2012, the new scheme will start to be phased in across the UK. At first the effects will only be felt by large firms with over 250 staff, but by 2014 it will start to have a similar impact on small businesses.
The Government will eventually require employers of all sizes to enrol their employees into a pension scheme if they are not already in a qualifying fund. The findings of the report suggest that small businesses are yet to consider the financial implications of having to perform such an action. To begin with the employer will only have to contribute a figure equal to 1% of the employee’s salary, but by 2017 this figure will rise to 3%. Each individual will have to contribute 4% of their salary to the scheme and the Government will add a further 1% in tax relief.
More than half of those surveyed feel that this change is going to add significantly to their costs. The survey, which covers 400 small employers in the UK, also revealed that a third of them were now likely to reduce their future pension contributions into existing and new schemes so that they could manage this additional cost.
Despite this, over half of the firms in the survey felt that it was a positive move to have automatic enrolment in the new pension scheme. However, there was still quite a large amount of scepticism that employees will simply choose to opt-out of the scheme and make their own pension arrangements. Many employers also complained that small businesses with only one employee should be excluded from the scheme while others expressed concern about the potential administrative burden. What are your opinions on the new legislation? Will it have a positive or negative impact on your business? We would love to hear from small business owners on this issue.
What are your opinions on the new legislation? Will it have a positive or negative impact on your business? We would love to hear from small business owners on this issue.