SMALL FIRMS FEAR IMPACT OF NEW PENSION LEGISLATION BY Paul Cassell
January 18, 2006
The Pensions Commission has recommended people contribute four per cent of their post-tax earnings to a state pension fund and their companies contribute three per cent.
The report also proposes automatically enrolling many workers on a compulsory National Pensions Savings Scheme (NPSS) and a gradual rise in the state pension age to 68.
The proposal has led to warnings from trade organisations, while businesses in the town also expressed their concern.
Les Cranston, director of KRA Consulting Engineers Ltd in Market Place, Wokingham, said: “This is just another cost we will have to meet and any additional costs mean we will have to charge the people we are working for.
“Something has to be done about the pension system but I’m not sure this is the best method. Employees should be more accountable for saving for their retirement than their employer.”
Andy Fern, proprietor of Creative Woodworking in Forest Road, Wokingham, added: “I do not think it is a particularly good idea and it’s not as if there is lots of surplus cash around.
“I do offer a pension scheme but when you have to fork out more it is bound to affect smaller businesses – that is something I would not relish.”
The Confederation for British Industry (CBI) welcomed reform and believed it was only reasonable that, as life expectancy increases, people should continue to work longer.
However, the CBI described compulsion as “the sting in the tail” that could threaten many small and medium-sized businesses, which would see an increase on their payroll by up to one per cent.
Sir Digby Jones, director-general of the CBI, said: “This reform could form the basis of a ‘new deal’ on pensions – but that deal cannot come at the expense of jobs and competitiveness among Britain’s small firms.
“Compulsory employer contributions may well not impact on large employers, who are already contributing generously to their employees’ pensions, whatever their type.
“But make no mistake, compulsion would be a step too far for smaller firms, who simply cannot afford such a hike in the cost of employment.
“It is absolutely right for workers to be able to choose whether they can afford to pay for a pension, but companies must get a choice too.
“The only opt-out available to some struggling smaller firms may be to shut up shop.”
Thames Valley Chamber of Commerce has also erred on the side of caution and is worried about the effect on smaller businesses.
Claire Prosser, policy executive, said: “We are very disappointed to see the speculation that employers would be expected to pay into the NPSS alongside employees has been right.
“Small firms would be particularly badly hit, and businesses have told us that they would have no option but to lay-off staff, freeze salaries and much needed investment.
“The administration of this scheme is a major worry. It could be a real nightmare for small firms in particular, who are already struggling to cope with the demands that the already complex payroll system places on them.
“The cost and administrative elements of the proposed NPSS are bad for small businesses and the Government must resist any plans to force businesses to pay into such a scheme.”
However, Ms Prosser stressed the chamber was not opposed to the concept of a national pensions scheme in
She added: “The NPSS, by making use of automatic enrolment, could serve to bolster saving among private sector employees and that is clearly a good thing.
“Put simply, the chamber would not oppose some kind of national savings scheme, provided that it encouraged rather than forced employers to contribute and was easy to administer.”