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Labour to launch Parliamentary challenge to protect small firm auto-enrolment

Gregg McClymont
Labour shadow pensions minister Gregg McClymont

Labour will attempt to force the Government to set in stone its commitment to include small employers in auto-enrolment after warnings the Pensions Bill opens the door for policymakers to exempt such firms from the reforms.

Earlier this week, L&G warned clause 34 of the bill, designed to allow the Government to exempt certain categories of employees from auto-enrolment, could be used to exempt smaller businesses completely. 

These concerns were heightened by a Department for Work and Pensions’ briefing paper setting out four “core principles” for the clause to be applied, including: “Is the employer able to arrange membership of a scheme without unreasonable financial or legal risk?”

L&G pensions strategy director Adrian Boulding said: “A minister could decide that for a small employer which is struggling to access financial advice, asking them to comply with auto-enrolment is unreasonable.”

This week’s Money Marketing reveals that Labour shadow pensions minister Gregg McClymont plans to table an amendment which would prevent the Government from using clause 34 to exempt certain types of business from auto-enrolment.

A spokesman for McClymont says: “We will put forward an amendment on clause 34, curtailing its use to the kind of limited technical changes which were stated by the Government to justify the clause. 

“This would not permit the exempting of classes of business from auto-enrolment.”

A DWP spokeswoman says: “The Government has no intention to use clause 34 as a way to exclude certain businesses from automatic enrolment.”

It is understood a number of Conservative and Lib Dem backbenchers have been lobbying the DWP and the Treasury to offer further concessions to small businesses struggling in the current economic climate. 

Auto-enrolment for firms with fewer than 50 employees has already been delayed until June 2015, after the next general election.

Cicero director and chief corporate counsel Iain Anderson says: “There remains a very effective lobby from the small business sector to backbench MPs on this issue.

“It has been there throughout this Parliament and resonates in tough times. Government is really concerned about any ‘red tape’ impacts on firms and especially SMEs right now.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “The DWP has always been clear that it does not believe auto-enrolment places an undue burden on small employers, so there is no reason to exempt them.

“Hopefully Labour’s amendment will remove any uncertainty about the future of auto-enrolment for small firms.”

Labour is also planning to table a separate amendment to the bill which would require all auto-enrolment qualifying schemes to either direct savers to an independent annuity brokerage service or offer such brokerage services themselves.

McClymont has previously raised concerns savers could lose up to a fifth of their pension income because “the market simply isn’t working”.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Well they bloody would wouldn’t they. The world experts at spending other people’s money. (Who got us in this manure in the first place?)

  2. Gareth E K Smith 3rd July 2013 at 9:50 am

    People want to wake up and smell the coffee and join the real world.

    Tom McPhail who probably never has had the benefit of visiting a bank manager begging for an overdraft to pay employees salaries or up all night tendering for contracts wants to visit the SME’s where I live up here in East Lancashire before coming out with a glib comment

    “The DWP has always been clear that it does not believe auto-enrolment places an undue burden on small employers, so there is no reason to exempt them.

    The reality here where I live is part time “minimum wage” employment.

    This will be a burden to many SME’s as I said in another thread the question I get asked most is “how do I get around it”.

    I have a client who runs a nursery and she just employ’s part time under the NI threshold and under NEST. Now before people have a go at her remember politicians moan about the cost of childcare. She isn’t making a fortune and has the worries over running a business.

    The reality is it is a Job’s tax just like employer’s NI and will result in more part time working resulting in less people paying tax as they fall under the £10,000 personal allowance.

    Radical Solution increase Employee’s National Insurance to increase the Basic State pension.

  3. @Harry Katz – Politicians of all parties who weren’t prepared to regulate the banking industry sufficiently – and then bought into the ridiculous ‘too big to fail’ arguement.

  4. @ Gareth

    As one who ran a factory in E Lancs. for many years you have it spot on. It’s is gratifying to realise I’m not alone in thinking AE is a pain in the proverbial for many (If not most) small firms. A job killer in fact – just like that other great Labour idea – Selective Employment Tax. (Probably before most of you were wearing long trousers).

  5. They would rather see people out of jobs as long as they can be seen to justify their overpaid roles as MP’s.

    Let’s face it apart from deciding which political party is going to screw us do we actually need that many MP’s who no longer represent the interests of their constituents and are more interested in their political careers.

    PS I dont think too many small employers need to worry too much as I know what the reaction will be from those on low wages when they know how much they have to put in as well.

  6. If you mean the low paid will opt out then I guess we’ll have to wait and see.

    Personally, I think the intertia ploy will work quite well and quite a lot of people will stick with AE.

    I just don’t get the level of animosity towards AE evidenced in replies thus far. It’s a far from elegant solution and the employer is crucial to ensuring compliance with the AE rules but this measure combined with a flat rate State Pension and the ultimate removal of means tested pension benefits, seems overall to be a good long term solution to building an income for retirement for the millions with no provision at all.

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