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Auto-enrolment arrives but is it a done deal for small firms?

When business secretary Vince Cable told the Liberal Democrat party conference he had defeated the Tory “headbangers” who “find sacking people an aphrodisiac”, there was little doubt who he was thinking of – Adrian Beecroft.

The Beecroft report, which was commissioned by the Government and published in October last year, contains a series of radical reform ideas designed to boost business, the most controversial of which was to allow companies to sack workers with a payout. In return, the sacked employee would agree never to bring a tribunal against the company.

While the LibDems may have successfully suppressed Beecroft’s highest profile suggestion, it would be naïve to assume his proposal to exempt small businesses from automatic enrolment has also been shelved.

There is no stopping auto-enrolment for big and medium-sized companies, of course – that ship has sailed, with the first workers being “nudged” into contributing to a pension from today.

But last year the Government pushed back the auto-enrolment timetable for businesses with fewer than 50 employees until 1 June 2015 – three weeks after the general election is due to take place.

That gives the three main political parties – who will already be thinking about their pre-election manifestos – an opportunity to reconsider whether forcing struggling small businesses to comply with the regulations is the right thing to do.

Make no mistake, auto-enrolment for small firms – which form a significant chunk of Nest’s ‘target market’ and account for millions of employees who do not yet have a pension – is still up for grabs.

Cicero Consulting chief corporate counsel Iain Anderson says: “It is no coincidence that auto-enrolment was pushed back until after the general election. One of the most effective lobbies on this issue has been the Federation of Small Businesses.

“That small business lobby will continue to keep up the pressure as to whether auto-enrolment should go ahead for small businesses given the current economic difficulties.

“I do not know if the Tories would go as far as to pledge not to bring it in in their manifesto. I think they will say they will continue to review whether or not auto-enrolment is suitable for small businesses in light of the prevailing economic circumstances.”

From a pure pensions perspective, auto-enrolment has to go ahead for small firms. If they are excluded the policy will be a monumental failure. It would also present a huge problem for Nest, the scheme set up by Government to make sure everyone has access to a good quality, low-cost pension scheme.

But this is not how politicians will necessarily view the situation. Forcing small employers to set-up a pension scheme and pay contributions when the economy may still be stalling isn’t exactly a vote winner. Neither is taking disposable income out of workers’ pockets.

It would therefore be remiss for the pensions industry to assume auto-enrolment for small businesses is a done deal. The economy will continue to be the big issue for politicians going into the next general election, and cutting costs for small businesses – the engines of economic growth – will be a tempting prize for any politician.

Tom Selby is pensions reporter at Money Marketing- follow him on twitter here


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There is one comment at the moment, we would love to hear your opinion too.

  1. And of course the’ Elephant in the Room’ is the probability that small firms will use NEST to enable their staff to opt out and some enterprising person will offer software to ensure that the rolling op in enables rolling opt outs. QED and NEST is a gonner.

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