Pensions auto-enrolment to be delayed for small businesses

Businesses with fewer than 50 employees will not have to auto-enrol staff into pension schemes until 2015, the Government has confirmed.

Minister for pensions Steve Webb confirmed in Parliament today that auto-enrolment for small businesses will be delayed for one year to allow additional time to prepare for the changes.

The Government also confirmed that automatic enrolment for businesses with 50 or more employees will begin in autumn 2012. Small businesses will have to begin automatically enrolling their staff in May 2015, instead of in April 2014 as previously planned.

Webb commented: “Our society and economy needs to be based on a foundation of saving, not debt. Automatic enrolment will help millions save, and to not act will leave people poorer in retirement.”

He added: “We recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space. This is a sensible step that ensures long term pension issues are addressed while meeting the short and medium-term needs of small business. We are committed to ensuring the employees of these small businesses get the chance to save and that is why no one will miss out.”

TUC general secretary Brendan Barber has called the move an attack on private sector pension rights. He argued: “Making staff in small businesses wait even longer before they get the right to an employer contribution to their pension is a grave disappointment.

“It is further confirmation that this Government sees small-business staff as second-class workplace citizens, not deserving of the same rights as staff in bigger firms. The need for a retirement income does not depend on the size of your employer.”

The Government has stressed that half of all workers will still be automatically enrolled before the end of this Parliament.

However, Joanne Segars, chief executive of the National Association of Pension Funds, has also called the announcement disappointing.

“It’s welcome that auto-enrolment is still starting in 2012 and it’s also a relief that all employers will be covered one day, regardless of their size,” Segars said. “But we’re disappointed by the further delay for smaller firms. When it comes to pensions, the Government should have stuck to plan A. These reforms have been a decade in the making, and now is the time to press play, not pause.

“Businesses will quite rightly be wondering how much faith they can have in the system, and whether more upheaval is in the pipeline. The Government needs to restore some trust in these hugely important changes. The UK simply isn’t saving enough for its old age, and we have to get these reforms right.”

Segars added that small businesses are critical to making the pension reforms work because their staff are the least likely to have a workplace pension.

Further details of the changes will be published in January.

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