Pension Change Affects All Businesses
Thousands of small businesses do not realise the impact of a recent ruling on staff pension schemes, a small business expert has warned.
All small businesses must now contribute to their employees’ pension funds and although the new law would be phased in from 2012, it is vital to get schemes in place. Jo Nockels, Chartered Certified Accountant and Communications Manager at TaxAssist Accountants explains:
“Following the Government’s announcement, all employers will, for the first time, be required to automatically enrol eligible employees into a pension scheme and pay pension contributions. Small businesses may wish to put their own pension scheme in place for employees, rather than rely on Government schemes, which may not be the best solution for their business.
“Even if businesses already have a workplace pension scheme, it may have to change to comply with the new law. Business owners will want to keep control of their employee benefits packages.”
Paul Baker, MD of national independent financial advisers, IFS, said; “Doing nothing until you have to is not the best option. By planning ahead, the cost of the pension provision can be phased in, making the whole process much easier and, from a cash flow perspective, much more manageable.”
A Pensions Regulator will police and enforce the new law, which applies to companies with over 800 employees from October 2012 and then will be staged over four years, with companies who have less than 50 employees affected from March 2014. Ultimately, qualifying employees will need to put 8% of their earnings into their pension pot, with at least 3% of that total contributed by their employer.
“Business owners can face fixed penalties of at least £400 and escalating daily penalties of at least £50 or even imprisonment for non compliance,” warns Jo Nockels. “Employers can avoid much of the administration burden associated with automatic enrolment by setting up their own pension scheme.”
According to figures published by the Department for Work and Pensions (DWP) last year, more than half of the UK's businesses are in support of introducing an auto-enrolment system. Data from the study revealed that 56 per cent of businesses and 64 per cent of eligible individuals are in favour of the planned reforms.
The new Pension reform is going to have significant impact on all employers, especially those businesses that do not currently make any employer contributions. With the deadline for auto enrolment fast approaching employers need to consider which type of scheme they wish to offer staff, how to budget for this and, if a scheme is already in place, to check whether the existing scheme meets Government requirements.
How we can help
All UK businesses will be affected by the Pensions Ruling. By being prepared you can minimise the impact the Reform will have on your business.
Talk to your local TaxAssist Accountant today to find out more.
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