A recent survey of SMEs has revealed that 46% do not provide a pension scheme for employees leaving little time to prepare for new legislation, aimed at dealing with Britain’s ageing population
In 2012 the Pensions Act 2008 will come into effect making it a legal duty for employers to automatically enroll all eligible employees into a pension scheme & contribute to it. Eligible employees are all UK employees who earn more than the minimum earnings threshold – currently £7,475 – & aged between 22 & 65 (or the prevailing retirement age).
According to the survey – carried out by Sage UK – a third of SMEs are unaware of the impending responsibility for them to provide a Qualifying Pension Scheme, with 54% assuming the Pensions Act will not effect their business.
Businesses will each be given a date – to be determined according to the size of the company – by which the legislation must be implemented. Sage is urging business to prepare now so as to fully understand & minimize the impact on their businesses.
Kathryn Shankland, Product Manager in Sage’s Small Business Division, commented:
“Business owners need to understand how and when this new reform will impact their firm. Even companies that already offer a pension scheme to their employees may still need to change processes, as there is a new minimum requirement that all pensions must adhere to.”
“If business owners are aware of the changes early enough and factor them into their plans and forecasts, it’s possible for firms to continue to grow their business and provide support for their employees’ futures. At the same time, businesses must take the time to effectively communicate the reforms to employees so that they also understand the impact this legislation will have on their finances as employees will have to provide a minimum contribution starting from 1% and rising to 3% by 2017,
unless they choose to opt out within three months. With pensions becoming increasingly important to retaining top employee talent, the importance of getting it right cannot be underestimated.”
The Federation of Small Businesses is also urging businesses to start planning now since the change will have a significant impact on their cashflow. It anticipates that a company with 4 employees would be looking at additional costs of £2,550 a year.
It is estimated that around 7 million people are not currently saving enough to support themselves once they retire.
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