Almost two thirds of the UK’s small businesses are failing to offer a pension scheme to employees, according to new research.
The report by the Association of Consulting Actuaries (ACA) found that while there are over 1.2 million small firms in Britain employing over half of all private sector workers (60%), the majority are failing to offer any kind of pension scheme to staff as they struggle to manage increasing costs.
The survey, which gathered responses from 404 smaller businesses with 250 or fewer employees, also revealed that smaller companies expect 35% of their workers to opt out of a pension scheme citing cost as the main reason.
ACA chairman, Stuart Southall, said: “Whilst the county’s dire economic position does not presently allow, it seems clear to me that if we are to encourage a much wider proportion of our people to save adequately for their retirements, we will need to make greater room for savings from individuals’ disposable incomes. Employers too will need new rewards for boosting their pension contributions and greater freedom in pension design.”
However, a quarter of all small firms have said that they plan to review their pension schemes in the year ahead. Furthermore, all businesses will be required to auto-enrol their employees into a ‘qualifying workplace pension scheme’ under the government’s pension reforms between 2014 and 2016.
Southall added: “Greater transparency and low-cost products will play a part in this, as will better consumer financial education and auto-enrolment – all of which is ‘work in progress’ with some areas more advanced than others, but more will be needed. A plan to provide new incentives to save, building up over a number of years as the economy recovers, is badly needed.
“The smaller firms covered by this survey – so important to the UK economy in terms of employment and innovation but – where pension provision is endemically weak – seem particularly needful of financial incentives to kick start sufficient levels of pension saving.”
© Crimson Business Ltd. 2011