Pensions shake-up to 'damage' micro firms

The Government's new pensions policy has failed to take into account the needs of the smallest firms, the Federation of Small Businesses (FSB) is warning.

Under the changes announced today, all companies - regardless of their size - will either have to offer a pensions scheme of their own, or enrol staff in the new National Employment Savings Trust (NEST), meaning millions of workers will save in a pension for the first time.

However, the FSB says it is "extremely disappointed" that micro firms - those with ten employees or fewer - will not be exempt from this requirement, which comes into effect for staff earning at least £7,475 each year, the same as the threshold for personal tax allowance.

Despite being designed to simplify the pension process for businesses, the FSB says that many of the smallest businesses lack the expertise to choose their own pension fund, and it warns that the extra administrative burden involved will damage firms.

NEST will come into operation on a limited basis in spring next year, with the legal requirement for employers to help their staff save coming into effect in October 2012.

FSB policy chairman Mike Cherry said: "While the FSB welcomes initiatives to help people save for their future, the FSB is severely disappointed the Government has not listened to the needs of the UK's micro firms and has not made them exempt from automatic enrolment into pensions, which will cost employers in time and money."

In addition, the organisation claims that many firms - and staff - are still unaware of the changes, and is encouraging the Government to raise awareness of NEST "to ensure that this ticking time bomb doesn't hit small firms without effective communication".

However, the FSB welcomed the 12-week waiting period between a new employee starting and needing to be enrolled in a pension scheme, saying it will protect employers "should something go awry".

Confidence to create jobs

Meanwhile, the reception from the British Chambers of Commerce (BCC) was more broadly positive.

Despite warning of the onus which it said rested on the Government to communicate the changes, the group said it was "relieved" about the Government's decision to "simplify and streamline" the 2012 reforms.

It also highlighted the 12-week exemption period as being a boon to companies with high staff turnover - such as those with many seasonal workers. According to BCC director of policy Dr Adam Marshall, this will benefit employment agencies, "which will be very important in the fight against unemployment and underemployment in the years ahead, will benefit hugely from this change".

"Today's announcement shows that there are ways to simplify regulation that can give the private sector the confidence to create new jobs," Dr Marshall added.

"Now the Government must embark on a communications drive to inform the 1.1 million employers in the UK of their new obligations.

"Unless businesses and their employees understand the changes ahead, we could see significant confusion as auto-enrolment comes in from 2012."

Attacking the calls to make small businesses exempt from the legislation, TUC secretary-general Brendan Barber hailed the "historic advance" of securing "a minimum pension to go alongside the minimum wage".

IMAGE John Stillwell/PA Wire

Whatever you put in the pot, let MORE TH>N insurance look after your future. Ask us for a cheap shop insurance quote today, or find out about our great value van insurance.