The UK Government has announced that small businesses will be given additional time to prepare for the implementation of auto-enrolment.
The revised timetable will see small businesses (fewer than 50 employees) begin to auto-enrol their staff from May 2015, instead of the previous date of April 2014. This way half of all workers will still be automatically enrolled before the end of this Parliament, said the Department for Work and Pensions (DWP) in a statement, allaying fears that auto-enrolment was set to be entirely postponed or even scrapped.
The start for the implementation of the changes for larger employers will remain the same and begins in autumn 2012.
The rate of pension contributions will remain unchanged until all businesses have started to automatically enrol their staff.
Minister for Pensions, Steve Webb, said: "We recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space. This is a sensible step that ensures long-term pension issues are addressed while meeting the short and medium-term needs of small business.
"We are committed to ensuring the employees of these small businesses get the chance to save and that is why no one will miss out."
Malcolm McLean, a consultant at the pensions actuary firm Barnett Waddingham, was less pleased with the changes saying that from a pensions and long term savings point of view this was "disappointing news".
"There was always the risk that the Government would lack the courage of its convictions and back away when push came to shove," says McLean. "But coming at this very late stage when the main legislation giving effect to auto-enrolment has been passed and when both DWP ministers and their opposition counterparts have seemingly been at pains to re-assure usthat the plans were firm and would go ahead – notwithstanding the economic situation – this comes as a bit of a surprise."
The consultant is of the opinion that other measures to help small employers through the current economic downturn is could have been taken. "Perhaps by offering greater fiscal support to them via the tax system to offset in part at least the extra cost of the pension contributions they were having to make," he suggests.
Punter Southall's head of DC consulting, Alan Morahan, said the change would not make much difference to small firms and said the Government should have considered the length of the phasing schedule, rather than its start date.
"Under the current process, larger employers and their employees get up to four years to get used to the lowest contribution band before the planned increases take effect. Smaller employers get a much shorter phasing period and unless this is changed the proposed delay to their staging date will have minimal benefit."
Joanne Segars, chief executive at the National Association of Pension Funds (NAPF), expressed disappointment at the delay for smaller firms. "When it comes to pensions, the government should have stuck to Plan A," Segars says. "These reforms have been a decade in the making, and now is the time to press play, not pause.
"Small businesses are absolutely critical to making these reforms work, because their staff are the least likely to have a workplace pension. This decision also risks creating competitiveness issues where small firms are competing with larger companies who are going ahead with auto-enrolment.
"The government needs to restore some trust in these hugely important changes. The UK simply isn't saving enough for its old age, and we have to get these reforms right."
She also said however, that she welcomed the fact that auto-enrolment was still starting in 2012 and said that it was also a relief that all employers would be covered one day, regardless of their size.
First published 29.11.2011
azeevalkink@wilmington.co.uk
