By 2018, small businesses across the UK will have had to restructure in order to incorporate the Government’s plan for pension auto enrolment. The scheme is intended to protect workers during their retirement but its implementation is expected to put extra pressure on some small business owners.
It is therefore vitally important that companies know all the facts and are fully prepared for the changes due to take place.
- Who is it for?
Many businesses already run a pension scheme, but even if this is the case it could require alteration in order to comply with Government guidelines. Currently, SME auto enrolment will apply to workers earning over £9,440 and who are between 22 and pension age. These goalposts could move slightly in the coming months. However, employees will be given the chance to opt out after a set amount of time.
- When does it start?
Starting for some businesses this year, the Government plans to see all organisations prepared for auto enrolment by 2018. The exact start date depends on the size of an individual business, as does the precise amount an employer is expected to contribute so seeking professional guidance on these matters is advised.
- What will it cost?
A major concern for companies when it comes to small business pensions is how exactly they will be able to cover the costs. Although the Government initiative will unavoidably add further pressure to already stretched budgets, there are plans to combine the rolling out of the new pension scheme with some targeted tax breaks. Outlined in the Government’s plans, it is hoped that these concessions will alleviate some of the pressure on smaller businesses in particular.
- How can companies prepare?
Even though some small companies still have time before they are expected to fully embrace auto enrolment, there are strategic changes that can be made in the short term in order to help in the future. Taking the time to review current payroll procedures and pension packages should make integrating regulatory changes somewhat smoother. One way in which companies can pre-empt the planned changes is to perhaps improve what they currently offer employees in terms of benefits and pensions.
With concern as to the reliability of retirement funds high on the agenda, companies might consider topping up their pension pots now. Not only will this potentially cushion the financial blow when the changes come into play, but it could also work to raise the profile of a company within its sector in addition to attracting, recruiting and retaining the best members of staff in an ever-competitive workplace.
- What are the risks?
Any professional adviser will tell small business owners that attempting to avoid the Government’s plans is certainly not an option. Companies that do not plan properly or fail to offer pensions in line with the new regulations will find themselves liable for severe financial penalties.
Appropriate planning with the support of experts in the field is essential in order to prepare for the proposed changes and to protect the future of the UK’s all-important small business sector.