Save microfirms from pension reform


FSB says small businesses should be exempt from automatic enrolment

The Federation of Small Businesses has called for all micro firms to be exempted from the automatic enrolment pensions scheme due to come into force in 2012.

The European Commission defines a micro-business as one which has fewer than 10 employees and a turnover or balance sheet total of less than €2 million.

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Responding to the “Government review of automatic enrolment” consultation, the FSB warned that the cost and time spent on administering the new pension system would damage micro firms and that the pension schemes designed by the government are not suitable for small businesses.

The FSB has also complained that the changes are too complicated and that small firms will not have the expertise to choose the correct pension scheme for their staff.

For small and medium-sized businesses, the FSB is instead calling for a default scheme to be set up in which everyone who is not currently saving should be enrolled, based on the following principles:

1.It should deliver to all employees and the self-employed the opportunity to save for a pension at an annual charge of 0.3% or less.

2. It should use a national payment collection scheme, such as PAYE, to decrease the administrative burden on small businesses.

3.It should provide members with the option of investment in very low cost funds.

4.It should keep contribution rates under constant review to identify whether changes are needed to achieve objectives.

The FSB is also worried that the majority of small businesses and their employees are unaware the country’s pension scheme will change in only two years, and is calling on the government to raise awareness of the default pension scheme.

Mike Cherry, FSB policy chairman, said: “The FSB welcomes initiatives to help people save for their future in a pension but we are still concerned the new automatic enrolment pension scheme is going to be an administrative headache for small firms – particularly micro firms – and will cost them in time and money.

“We know that small firms do not feel confident in choosing a pension scheme because of its complicated nature and we are thoroughly disappointed that five years on from the original proposals, the pensions industry has yet to come up with an efficient system to cater for micro firms. The FSB is calling on the government to make micro firms exempt from the automatic enrolment scheme and improve proposals for small firms.”

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