The government has been urged to make allowances for small firms when proposals that will oblige employers to contribute to staff pension schemes come into force in 2012.
Manufacturers submitted a proposal to the Treasury today calling for finanicial assistance for small firms when the personal accounts pension scheme is introduced, as part of the government’s pension reform.
The pensions White Paper lays out plans to automatically enrol employees into the new scheme, to which employers will be obliged to contribute, with the aim that all workers not in occupational pension plans will be signed up by 2012.
Staff will pay in 4% of their salaries and employers 3%, to be phased in over three years, with the government providing an extra 1% in tax relief.
However, manufacturers’ organisation the EEF has argued that smaller firms would need financial help initially to meet the costs of their contributions and has proposed that these are subsidised for the first three years.
The organisation estimates that compensating companies with up to 49 employees for half of their contributions would cost £221m in the first year.
EEF deputy director of employment policy, David Yeandle, said: “We support personal accounts and believe the role of smaller employers will be critical for their successful implementation given many of those who are not currently saving for their retirement work in small businesses.
“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.”
The EEF said that by subsidising small firms’ contributions, the government would be creating an environment in which the small business community is more supportive of personal accounts.
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