Almost two-thirds (65%) of the UK’s small businesses are no nearer to enrolling their staff in a workplace pension required under new legislation, according to a new report from the Chartered Insurance Institute (CII) called “Advice Needed!.
Research conducted among 500 firms with up to 49 employees, shows that 42% have not thought about the new regulations for automatically enrolling staff in a pension scheme. In addition, nearly a quarter (23%) – though considering the regulations – are yet to take action.
Most businesses of this size (59%) know little or nothing about the pension reforms – which begin to take effect for large firms from October 2012 – with only 12% claiming to know a lot about them and a mere 8% having an implementation plan in place. Such low levels of knowledge and activity may reflect the now extended pension reforms’ “staging dates” – from June 2015 to April 2017 – stipulated for the UK’s smallest businesses.
Currently, 6 out of ten firms employing fewer than 50 staff do not offer their employees a workplace pension, with just 27% making a provision for both full and part-time staff. And the gap between small firms (10-49 staff) and micro businesses (1-9 staff) is stark, with 65% of the latter offering no pension scheme at all.
The research shows that financial advice could be key to successful implementation. Of those companies (13%) that have already begun the planning process by seeking external assistance, more firms (46%) have chosen to consult a financial adviser rather than their accountant, pension provider or the Department for Work and Pensions.
David Thomson, director of policy and public affairs at the CII said: “To be fully prepared for the pension reforms, businesses need to decide what pension scheme they will offer their employees, how they will initiate and administer the scheme and how they will advise employees on pension saving.”
“And though implementation is not supposed to be complex our research shows that firms could benefit from engaging a financial adviser at the earliest opportunity to ensure the auto-enrolment process runs smoothly and with minimum disruption to business. Early employer engagement will also be important to help boost employee participation and contribution rates”
Under the pension reforms, all employers will be obliged to automatically enrol staff into a pension scheme, make contributions on their behalf, register with The Pensions Regulator and inform employees how the changes will affect them.
Though the Government has extended the staging dates of the reforms for firms with fewer than 50 employees on their PAYE scheme, they still need to start planning and budget to comply with the new rules.
Research was conducted among a sample of 500 small and micro firms by Populus in early May. Populus surveyed a larger proportion of small employers than would be usual in a general survey of UK firms because we wanted to ensure we collected robust and detailed data from this group. This means that larger firms were over-sampled relative to the smallest firms since they are scarcer. Employer results were then weighted to the known population for each employer size band to ensure they were representative.