Manufacturers’ organisation the EEF has developed a model for providing smaller firms with some financial assistance when personal accounts, a key element of the government’s pension reform programme, are introduced.
The EEF believes this initial financial support is needed to help many smaller companies that will face the additional costs of administering and contributing to personal accounts on behalf of their employees.
The model, which has been submitted to the Treasury, involves the government compensating smaller employers for a proportion of the contributions that they make into personal accounts for their employees during the first three years of their operation.
The employers’ body has estimated that compensating smaller companies with up to 49 employees for half of their contributions would cost the Treasury £221m in the first year.
This would fall to £161m if the support was only provided to firms with less than 20 employees.
According to the EEF, it will also help to create an environment in which the small business community is more supportive of personal accounts – an important requirement for their successful implementation.
David Yeandle, EEF deputy director of employment policy, said: “The role of smaller employers will be critical for the successful implementation of personal accounts as many of those who are not currently saving for their retirement work in small businesses.
“The government should take all necessary steps to gain the support of these employers for personal accounts, and we believe there is a strong case for providing them with some initial financial assistance.”