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23 Jun 2014

Small Employers Should Get Ready For Auto-Enrolment

Automatic enrolment in the UK has been running smoothly so far, as large companies have generally been prepared for the changes to workplace pension schemes. However, the most challenging time for the government´s initiative to boost pensions saving is still to come, according to industry specialists, Investment and Pensions Europe website reported.

Chris Daykin, former government actuary, believes that the real test will come in 2016 and 2017, when thousands of smaller employers will have to enrol their staff in workplace pensions. So far, opt-out rates have stayed firmly below 10%, but once employees at small businesses start being enrolled these could shoot up to 20% to 25%, he said.

A recent study by workplace pension specialist Now Pensions has shown that small employers lack understanding and awareness of auto-enrolment, which poses difficulties when the time comes for them to enrol their staff. Moreover, the cost of enrolment for such employers could be significant, according to Daykin. Costs may be pushed further up by failure to comply with all requirements, which could lead to hefty fines from regulators.

But small businesses can make sure they are prepared in advance, too. The key is not to underestimate the task and to allow themselves enough time to become compliant with regulation. It is important that small businesses get the right advice because they may need support with legislative complexities, HR Magazine said. Communicating the benefits of pension saving among employees is also crucial, so employers should make sure the purpose and conditions for auto-enrolment are clearly explained.

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