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Mandatory pension plan could prove costly for small businesses

Could mandatory pensions prove costly to small businesses?

Could mandatory pensions prove costly to small businesses?

Small businesses could be faced with growing employment costs with the introduction of the mandatory pension scheme, according to the Federation of Small Business (FSB).

According to a report by the FSB, automatic enrolment into a pension scheme, that’s due to come into force in 2012, could cost small firms over £2,500. However, the FSB have also said that the “true administrative costs” could prove
much higher.

All businesses and their staff members are to be fully enrolled on a pension scheme by 2017. The businesses will be expected to pay at least 3% of an employee’s salary into a pension plan.

Micro businesses (those that employ 1 – 4 people) have been told by the Government that they will only be expected to pay £46 per employee in administration costs. However, the FSB have said that this is a “gross underestimation” and is pushing the Government to run an impact assessment as soon as possible.

Policy Chairman for the FSB, Mike Cherry, commented:

“It is vital that everyone is able to save for their future but the automatic enrolment scheme is going to cost the smallest businesses dear. While Government has put measures in place to make the enrolment process easier for micro firms, it is going to cost them at least an extra £2,550 a year.”

Mr Cherry went on to add:

“The true administrative costs, however, are unknown and could be extortionate. We are calling on the Government to publish a proper impact assessment immediately to shed the true light on just how much these changes will cost small businesses.”

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