Auto-enrolment too expensive for micro-firms

| October 19, 2012 | 0 Comments
Auto-enrolment too expensive for micro-firms

The Association of Consulting Actuaries (ACA) has called for the government to re-consider auto enrolment for the smallest firms, who might struggle with the costs of administering the scheme.

From 1 October the largest companies have been required to automatically enrol workers in a pension scheme unless they chose to opt out.

The scheme will gradually be rolled-out to companies of all sizes, with companies of 250 employees or fewer due to join the scheme between 2014 and 2018.

Firms with fewer than 50 employees won’t have to join the scheme until after the general election in May 2015.

The ACA has called for the 750,000 UK firms with fewer than five employees to be allowed to participate on a voluntary basis only.

ACA chair of PR communications Steve Leake said: “We think the Government should look at excluding micro-employers from the legislation initially, because it will be difficult to police so many tiny firms and the whole system might start to creak as a result.”

A study by the ACA found that less than 1 in 5 firms have detailed knowledge of auto-enrolment regulations and their duties as employers.

More than half of the companies that are aware of the new regulations said that the regime appeared ‘complex’, which around a quarter said it appeared ‘very complex’.

Meanwhile the National Association of Pension Funds (NAPF) is calling on the government to introduce new rules which will allow pension funds to offset the effect of the Bank of England’s quantitative easing (QE) programme.

NAPF wants the government to set an enhanced gilt rate which pension schemes could use for discount rate calculations.

NAPF attributes around half of the £229bn deficit currently being carried by 6,432 final-salary schemes to QE.

The Bank of England’s QE programme is designed to boost the UK economy and stop it falling deeper into recession.

Without QE, pensioners would be worse off than they are, the Bank argues.

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