August 17, 2010

FSB warns pension reforms could harm micro firms

by Jan Harris

The automatic enrolment pension scheme, due to come into force in October 2012, could be detrimental to so-called ‘micro firms’, the Federation of Small Businesses (FSB) has warned.

Micro firms – those with 10 or fewer employees – should be exempt from the new rules according to the FSB.

Under the proposed scheme it would be the duty of employers to enrol workers into a workplace pension, and the company would have to make a minimum contribution of 3% towards a defined contribution scheme.

The FSB is concerned that the costs of administering such schemes would be prohibitive for micro firms and the schemes set up by the government do not meet small firms’ needs.

According to the FSB’s research 70% of employers do not feel they have the necessary expertise to select a pension scheme for staff.

The organization wants the government to establish a default scheme for everyone who is not already part of a workplace pension.

The FSB was responding to the Government’s consultation over the proposed changes.

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