IoD makes plea for auto-enrol exemption for small companies

19 August 2010 | By Nicole Higgs

The Institute of Directors has warned that the current plans for implementing auto-enrolment are too tough and is calling for firms with fewer than five employees to be exempt.

It says it supports the principle of auto-enrolment but the design of the proposals is “complex and impractical in a number of respects and will be extremely onerous on employers”.

It says firms with under five staff should not be required to auto-enrol and where an employee requests enrolment, they should have the right to an employer contribution regardless of the size of their company.

The IoD proposes a three-month delay before auto-enrolment takes place rather than enrolling employees from day one in order for firms to educate staff on the benefits of pension saving and reduce opt-out rates.

It wants auto-enrolment to apply only to those with a minimum salary of between £10,000 and £15,000 rather than the £5,035 currently proposed to ensure saving is worthwhile for people on the lowest incomes.

Senior adviser on pension policy Malcolm Small says: “Without some significant redesign, there is a danger that auto-enrolment will not deliver the best results in terms of pension savings but will impose an onerous administrative burden on employers, particularly small firms.”

Intelligent Pensions technical manager David Trenner says: “Although I can see the reasons for excluding low-earners and small employers, we need to look at this from the angle of employees who could end up with no pension at retirement if they are not included in auto-enrolment.

“I think someone with two part-time jobs giving them, say, £1,000 per month combined needs to be included in Nest and someone who works for small employers throughout their careers still needs a pension. Small employers are not exempt from paying NI, so why should they be exempt from providing pensions for their employees?

“Providing pensions for staff may well be onerous for employers but so is health and safety and even the smallest employer should expect to look after their staff.”

The TUC warns the Government should not risk destroying consensus on workplace savings. It wants a review of Nest put off until 2017 so the scheme can be tested before making a decision.

TUC assistant general Kay Carberry says: “Major changes now risk undermining the whole package before it has even started. No group is 100 per cent happy with Nest but a careful cross-party consensus has been forged over the last five years.

“A failure to introduce Nest now will condemn another generation of low and median-earners to poverty in retirement and complete reliance on the state in old age.”

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