New pensions proving popular – but fears for small firms facing auto-enrolment
The Government has hailed its changes to UK pension rules for widening the amount of money people are putting aside for later in life. But concerns have been raised about the ability of small firms to cope as changes are rolled out even further.
The Government recently issued a set of figures that showed that 70% of eligible employees –13.9 million people – paid into a workplace pension in 2014. That marks a rise of 15% in two years.
The rise has been particularly marked among 22 to 29 year olds, with 54% making regular contributions in 2014 up from just 24% of this age group in 2012.
Minister for Pensions, Baroness Ros Altmann said: “There has been a dramatic increase in pension saving across the board, which is great news.
“Automatic enrolment is key to a pensions revolution which is breathing new life into workplace pension saving, to help give people the security and independence to start planning for their future.
“The numbers of people participating are set to continue rising as automatic enrolment extends its reach to small and micro firms between now and 2018, by which time about 9 million workers will have been enrolled.
“We are working hard to try to help more employers set up and contribute to pensions for their employees.”
Minimum contributions that must be paid by those automatically enrolled into workplace pensions will rise to 8% to 2018.
Further Office for National Statistics figures released by the Government showed:
• those earning between £10,000 and £20,000 saw the largest participation increase between 2012 and 2014, more than doubling from 21% to 50%
• the rate for staff in hotels, restaurants and bars is now running at 59% – up 31% in two years
• the energy and water industry has the highest participation rate, with 83% of workers now paying into a workplace pension, an increase of 18% since 2012
• 73% of women and 68% of men are now paying into a workplace pension
The automatic enrolment process has been completed by large and medium-sized employers, with 5.3 million people enrolled by more than 50,000 employers.
It’s now over to smaller firms to move over to the system by 2018, but some fear they are not ready to handle this.
If they don’t set up a scheme by the date specified by The Pensions Regulator they face a hefty fine – £500 a day for businesses with between five and 49 employees.
Some businesses will be unused to offering benefits to employees and will need help to administer this.
Roger Sanders OBE, MD of Lighthouse Group, told thecsuite: “So far, it has been larger companies that have had to auto-enrol. But now, as we move to the stage where employers with fewer than 50, 30, or 20 staff have to enrol, we could see businesses facing some problems.
“Typically these businesses would not have a HR department and the management at these firms may not realise that setting up a workplace pension and enrolling employees is surprisingly complex and time-consuming. It is also easy to get it wrong.”
The Pensions Regulator has issued advice in a bid to help small businesses with such concerns.