Knutsford firms urged to prepare now for £3.2bn pensions ‘bouncer’
Mace & Jones head of employment law Martin Edwards issued his warning to bosses after the pensions minister Steve Webb confirmed all companies will have to abide by the new auto-enrolment rules, despite speculation smaller firms would be excluded.
Mr Edwards said under the reforms all employers will be compelled to enrol their new recruits and existing employees automatically into a pension scheme. Auto-enrolment will be phased in from 2012. The Government will phase in employer contributions from one per cent of salary in 2014 for smaller firms to three per cent from the employer and four per cent from employees by 2017 plus one per cent tax relief. The plan will mean more than eight million more people saving for their retirement. The Government expects firms to face a £3.2bn a year extra cost by 2017.
“These are clearly fundamental changes affecting all small businesses,” said Mr Edwards. “Failure to prepare will be like a batsman caught off guard by an unexpected bouncer. The changes will carry significant costs and firms will need to factor this cost into financial planning. There will also be additional and time consuming red tape to comply with. Existing pension schemes may be suitable for auto-enrolment, but their rules will may to be changed.”
Mr Edwards urged firms to not sweep the pensions reform under the carpet.
“All firms need the time to prepare themselves and their employees and put financial planning and HR planning in place,” he said “The more firms prepare the less costly and disruptive these plans will be. It is important to take professional advice and ensure you are aware exactly how these reforms will affect your business. It is also important that owner managers can explain the changes to employees so they are aware of what the reforms mean for them and how they can best plan for their futures.”
Firms seeking pensions and employment law advice should contact: firstname.lastname@example.org or any member of the employment and pensions team in Knutsford: 01565 634234
Background: When the Pensions Act of 2008 came into force, it contained provisions for subsequent changes to the UK’s pension system which are likely to have significant implications for small and medium sized enterprises. The basic idea behind the new provisions is to encourage as many people as possible to plan for their retirement above and beyond the statutory state pension: people are living longer, and funding a comfortable retirement will require savings now, not tomorrow.
The reforms are due to come into effect over a period from 2012 to 2016, and require employers to automatically enrol all staff into a pensions scheme and to make employer contributions to it.