Auto-enrolment will be delayed for small employers until 2015.
The government has announced that the timetable will be adjusted so that small organisations, with less than 50 employees, will begin automatically enrolling staff in May 2015, instead of the current timing of April 2014.
Auto-enrolment will commence for the largest organisations in autumn 2012 as planned.
Steve Webb, pensions minister, said: “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.”
Read more articles on auto-enrolment and the pension reforms
We have always supported the staged roll out of auto-enrolment and felt that a staging date for most smaller employers of mid-2014 gave enough time to plan and budget for a suitable scheme.
We felt the timetable was achievable and was overwhelmingly beneficial to the large number of employees who are currently not saving for retirement through any form of workplace scheme.
However, we acknowledge that in today’s difficult financial climate a short delay may provide some employers with more flexibility to plan their auto-enrolment process.
Providers and advisers need to continue to work closely with employers to minimise the cost of auto-enrolment and maintain the momentum behind these important reforms.
From a pensions and long-term savings point of view this is disappointing news. There was always the risk that the government would lack the courage of its convictions and back away when push came to shove.
But coming at this very late stage when the main legislation giving effect to auto-enrolment has been passed and when both DWP ministers and their opposition counterparts have seemingly been at pains to re-assure us that the plans were firm and would go ahead – notwithstanding the economic situation – this comes as a bit of a surprise.
The concern to help and sustain small to medium-size employers through the current economic downturn is, of course, understood, but that could be done in other ways – perhaps by offering greater fiscal support to them via the tax system to offset in part at least the extra cost of the pension contributions they were having to make.
It is a fact that many of the employees of these sorts of companies are the very ones who are most in need and stand to gain most from having an employer-backed pension scheme. Why should they miss out when others who happen to work for slightly larger companies stand to gain?
The DWP’s statement suggests that for small employers (up to 50 employees) it is delaying the implementation of auto-enrolment, not scrapping it completely. But is that so, and can we be sure that if the economic situation is no better by 2015 that the timetable won’t slip again?
While small employers will no doubt be relieved by the delay to their auto-enrolment staging date, Punter Southall urge the government to also consider the phasing schedule for these employers.
Under the current process, larger employers and their employees get up to four years to get used to the lowest contribution band before the planned increases take effect. Smaller employers get a much shorter phasing period and, unless this is changed, the proposed delay to their staging date will have minimal benefit.