The introduction of auto-enrolment and personal accounts into the UK pensions system in 2012 is being heralded as the panacea to prevent inertia which hinders the current system.
Under the proposals, employees will contribute 4% of their pay into the scheme, with employers paying in 3% and the government contributing 1%.
Great news, but spare a thought for small employers.
The minister for pensions reform, Mike O’Brien, has said there are nine million people who currently worked for an employer who had not made any contribution to their pension.
He has said time and again that personal accounts will complement rather than replace existing pension provision, and target low-to-moderate earners who did not have access to a company scheme.
High up on this list are smaller employers, some of whom might not be as pleased with personal accounts as the pension fraternity, and who will suddenly find themself 3% per employee out of pocket.
David Yeandle, deputy director of employment policy at the Engineering Employers' Federation said: “The EEF is supportive of government’s proposed personal accounts system and auto-enrolment. It has recognised how important it is to support business by phasing it in three years.”
But, Yeandle insists that government should also provide some initial financial support for smaller employers when personal accounts are introduced.
“Providing this initial financial assistance would help smaller employers to meet the additional costs that many of them will face for the first time in contributing,” he said.
This will foster an environment, in which smaller employers are more supportive of personal accounts, he said.
The EEF suggests that government reimburse smaller employers for a proportion of the contributions that they have made into personal accounts for their employees during the initial years of its operation.
And for the sake of buying people into this new system, I agree.
