All businesses in the UK must sign up to the governments new Auto-enrollment pensions scheme by the 1st February 2018, but even with the deadline looming, a staggering 35% of small businesses still have no idea what this new initiative is and how it will affect their business. However, the UK’s changes to pensions plans will have a significant impact on small businesses.
What Is The UK Auto Enrolment Pension?
The Auto-enrollment scheme forces every business in the UK to contribute to their employees pensions. Every employee in the UK will be signed up to their businesses pension unless they opt out. The new scheme will cost employers 1% of employee’s earnings, rising to 3% in April 2019.
How Many Small Business Are Ready?
Local services marketplace Bidvine was eager to find out what small businesses thought of the new scheme, but found instead that over a third still do not know what Auto-enrollment is. The survey polled 2,300 small businesses in the UK and also found that 43% of participants stated that the cost of Auto-enrollment would have an adverse effect in hiring new staff in the future.
The survey asked participants, “Has your business already complied with pension auto-enrollment?” to which 33% answered no and a further 35% hadn’t even heard of it. In a bid to find out if there was enough support and secure business information about Auto-enrollment, they also asked, “Do you feel that you have had enough information and support regarding the Auto-enrollment scheme?” 65% answered no, while 66% admitted that they did not know when the deadline to sign up was.
What Do Business Owners Think?
Russ Morgan, commented on the results, saying:
“We wanted to get insight into what small businesses think about auto-enrollment seeing as it’s going to affect every employer in the UK. We were astonished to discover that many didn’t even know what it is!
“We were pleased to see that most business owners agree that auto-enrollment is a good idea, however it is slightly worrying that 43% said the extra cost will affect hiring new employees – something the government may have to consider in the future as it may affect employment.”
When Is the Auto-Enrolment Deadline?
The Auto-enrollment scheme has been rolling out for some time, with large and medium size businesses already contributing to employees’ pensions, with small businesses having the deadline of the 1st February 2018 to sign up. Failure to do so could lead to heavy fines or even imprisonment for small business owners and directors.
Why Embrace Auto-Enrolment Pensions?
Since 2008, the UK government has introduced many pension reform plans. Yet, most workers have not built up enough retirement savings. As a result, they are relying on the State Pension for retirement income. Obviously, this income stream might not be enough to live comfortably. Most citizens need another type of sponsored retirement plans. Thus, the government has been phasing in the Auto-Enrolment pension scheme for large and mid-sized companies. Now, they are making their effort complete after 10 years, mandating small businesses to enrol in 2018. However, the major impact will be made when the percentages increase in 2019.
Every business should be enrolled in the UK Government Pension scheme by February 1, 2018. With the exception of self employed businesses without employees, most businesses will be offering an auto-enrol pension plan to their workers. In the long run, it will help ensure that workers have the proper amount of retirement income later on in life.
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