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Experts react to delay for small firms on auto-enrolment

Posted: 29th November 2011

The government has announced that small businesses will be given additional time to prepare for the implementation of automatic enrolment.

Under the revised timeline, small business would begin automatically enrolling their staff in May 2015, instead of the current timing of April 2014. The news has been met with mixed responses.

Michelle Mitchell, charity director of Age UK, said: "This is an extremely disappointing decision and one that will affect millions. It is appalling that the many employees who work for a firm with under 50 employees will miss out on at least a year's worth of contributions which will make a real difference to being able to save for a decent retirement.

"Legislation to introduce auto-enrolment was passed in 2008 and we should not delay further this chance to make the biggest change in private pensions for a generation."

Maggie Craig, director of life and savings at the ABI, said: "We have always strongly backed automatic enrolment as a good way to get people saving and our view on that remains unchanged. It is imperative that we help employees with no pension start saving as soon as we possibly can.

“We are pleased that the government still plans to start automatically enrolling employees in 2012. We do realise that the UK is facing huge economic challenges and that small businesses are up against it. We support the government's efforts to alleviate some of this burden by allowing more time for the economy to recover before smaller companies start enrolling their employees into a pension.

“However it will be very important that this is not allowed to slip and slip. We need to keep up the momentum to address the UK's savings crisis. We need a firm timetable so that employers are clear what is expected of them and the millions of workers in the UK without a pension can start saving for their retirement." 

Paul Goodwin, Aviva's director of workplace savings, said: "We have always supported the staged rollout of auto-enrolment and felt that a staging date for most smaller employers of mid 2014 gave enough time to plan and budget for a suitable scheme. We felt the timetable was achievable and was overwhelmingly beneficial to the large number of employees who are currently not saving for retirement through any form of workplace scheme.

"However, we acknowledge that in today's difficult financial climate a short delay may provide some employers with more flexibility to plan their auto-enrolment process. 

"Providers, including NEST, and advisers need to continue to work closely with employers to minimise the cost of auto-enrolment and maintain the momentum behind these important reforms."

Neil Carberry, CBI's director for employment, said: "A longer phasing-in period for these reforms will help small firms cope with costs they would have incurred if they'd been brought in during 2014 and 2015.

“This will not compromise the goal of getting the vast majority of employees saving.”

John Longworth, director general of the British Chambers of Commerce, said: Pensions auto-enrolment imposes huge costs on business, with the government’s own estimates suggesting it will cost employers over £4.5bn per year. In the current climate, a delay to auto-enrolment for small businesses with fewer than 50 employees is good news.

“However, the changes proposed today will bring new uncertainty to all firms with fewer than 3,000 employees. The vast majority of employers in the UK will be left in a state of confusion. The government must urgently work to deliver certainty to affected companies, and immediately clarify when this latest policy shift will affect them.

“Since smaller businesses will now not be required to auto-enrol their staff in pension schemes until the next Parliament at the earliest, the government has an important window of opportunity to pare back the costs they face when they do join the system.

"In a recent BCC survey, a third of sole traders said than pension requirements were a total or significant barrier to taking on their first staff member. Exempting sole traders from pensions auto-enrolment when they take on their first employees would remove a significant barrier for those business owners looking to expand their business.”