A staggering 59% of small businesses know little or nothing about the impending pensions reform, which will see automatic enrolment into company pension schemes for everyone. The research, carried out by the Chartered Insurance Institute (CII) highlighted the lack of knowledge in roughly 650,000 small businesses, employing roughly 4 million people.
Only a small proportion of businesses have sought advice over the reform, which is the government’s strategy to encourage workers to save for retirement. Over the coming years, every business in the UK will be required to implement a company pension scheme, and automatically opt every employee into it. Employees will have a window within which they can opt out.
Indeed, with just 8% of small businesses having already implemented a company pension scheme for all employees, the government has acted to extend staging dates up to April 2017 for the UK’s smallest businesses. There is even speculation that, with so few businesses prepared, the government will push the date back even further, despite having allowed businesses to bring forward the staging date voluntarily.
The research clearly highlights the fact that businesses don’t have the time to fully understand the complicated implementation of a new pensions scheme. Therefore, they are dependent upon third parties to provide information, but with so many unaware of the requirement to implement a scheme, awareness is clearly the issue.
Businesses with greater than ten employees appear to be slightly better prepared, with those who have dedicated HR resource (internal or external) at a more advanced stage than others.
So, for small businesses, is this a case of “a problem too far away”? Those who knew about it said that they wouldn’t implement until the last minute. Financial Advisor Peter Clarke from Buckinghamshire-based IFA Abbott Clarke said that:
“Any perceived savings from putting off implementation are illusory. Automatic enrolment is a significant challenge for time-starved businesses, but there are notable benefits; if, as a small business, you have a pension scheme now, you gain an edge in recruitment when the job market is competitive.”
“Employees are seeking peace of mind about their pensions – often, the lack of a pension is a barrier to joining a growing business. Implementing now helps you overcome that barrier. Small businesses just need to seek advice now in order to fully understand their obligations, and how they can best meet them.”