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Smaller employers will be hit by compulsory pension plans

Plans to begin implementing auto-enrolment pension schemes in 2012 will hamper the ability of smaller firms to run their businesses, it has been claimed. A new survey from the Institute of Directors (IoD) found that over a half of the businesses polled (57 per cent) thought that the administrative burden imposed by the rules will be high or very high.

The auto-enrolment programme, which will begin its phased introduction in October 2012, means that, over time, employers must include staff in occupational pension schemes, although workers will be granted the opportunity to opt out if they so choose.

Employers and employees will be required to contribute to the funds, the requirement being that firms eventually make a minimum contribution of 3 per cent of employees’ earnings. (For employees the figure is 4 per cent.)

The burden, the IoD said, is likely to fall hardest on smaller businesses. Data suggest that 95 per cent of the firms that currently do not have any pension arrangements which include employer contributions are SMEs. The concern is that such businesses lack the specialist human resource functions that larger firms can afford. What’s more, as many as one in five employers (20 per cent) are still unaware of the precise legal implications of the new plans.

Miles Templeman, the IoD’s director-general, commented: “Bigger businesses will mostly have pension arrangements for employees set up. Of course we need to improve retirement provision in the UK, but yet again it’s the small entrepreneur who is hit.”

If you are concerned about the new pension rules, please remember that we can provide you with expert advice and guidance on their effect and implementation.