Automatic enrolment into a pension scheme, due to come into force in 2012, will cost small businesses £2,550 – but there are fears that the true administrative costs will be much higher.
The Federation of Small Businesses (FSB) warns that the average small firm – that is, a firm with four employees earning an average salary of £25,000 – will pay least an extra £2,550 per year in administration and pension costs. This is significantly higher than the government’s £46 estimate per person.
From 2017, all firms and their staff will have to be fully enrolled into a pension scheme and business owners will have to pay a minimum of three per cent of an employee’s salary into a pension.
While measures have been put into place to make the administrative burden easier for small businesses, concerns remain that they don’t go far enough, and that the Pensions Regulator (the body that supervises the pensions industry) will be tough on non-compliant firms.
But the FSB wants the Pensions Regulator to adopt a light-handed approach when the rules are put in place, before any financial penalties are enforced. The business body also wants to see “clear and effective” communication to small businesses on how the new regulations will affect them and what will be required.
“The automatic enrolment scheme is going to cost the smallest businesses dear,” says Mike Cherry, policy chairman at the FSB. “The true administrative costs are unknown and could be extortionate. We’re 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.”