• Small businesses are unaware of the true cost of introducing auto enrolment
• One in three of the total UK working population are employed by small businesses
Small business growth in the UK could be under threat if companies do not plan adequately for the introduction of auto enrolment according to workplace pensions and savings provider, GenLife.
All UK companies will be obliged to be auto enrolment ready by 2018, but while larger companies have the resource to implement such schemes, smaller companies, due to their relative scale, will find their profit margins eaten away if they wait too long to implement a programme.
Nick Ayton, Managing Director at GenLife commented: “Small business growth has been the cornerstone of our current economic recovery. Currently 95% of employers in the UK have fewer than 50 employees, representing just less than one in three of the total UK working population.(1)
“While firms will be required to introduce 2% total pension contributions in the first instance, this will rise eventually to 8%. For many small businesses, these kinds of contributions could represent their total profit margin.
“There is a cost to setting up an auto enrolment programme, but this will be manageable for most businesses as long as they implement the scheme appropriately. Small businesses should stagger their enrolment introduction to spread the costs and avoid trying to put together a programme when there are other business requirements such as a significant tax bill or annual employee pay increases.
“The introduction of auto enrolment is vital in helping to fix long-term issue of retirement funding, but small businesses will need support to overcome the challenges of initially implanting such a programme. For many owners, the process is just too daunting due to its perceived complexity, but it is something than can be easily overcome.
“It’s a myth to think that auto enrolment programmes take months to implement. We can set one up within minutes if required. The key for business owners should be to keep red tape to the minimum and seek out the lowest annual management charges for their pension funds.
“The difficulty is that small businesses suffer from auto-enrolment ‘blindness’. Either they are not aware of their staging date, are placing it low down on their priority list or choosing to ignore it altogether. Small businesses don’t normally have in-house experts in pensions, payroll and data management and, in their infancy, may not be able to afford to bring in external advisers or expensive services to resolve the issue.”
GenLife aims to revolutionise the workplace pensions market given its low 0.3% AMC. For the very first time small and large savers get access to world class saving options. There is no charge to the employer for using GenLife’s proposition and firms are guaranteed to be accepted.
While employees have the choice to opt out of the workplace pension, it is mandatory for all employers. If businesses don’t comply, they could risk a penalty notice of anything from £400 to £50,000, depending on the issue and the size of the company.
Ayton, continued: “This is no time for business owners to bury their heads in the sand. The cost of any fines that an owner might incur by not taking steps to implement an auto enrolment programme could simply cripple businesses that already have a low net income. Now is the time for these owners to act.”