Employers and employees in small businesses could struggle to comply with an increase in auto-enrolment pension contributions, according to a report by the Association of Consulting Actuaries (ACA).
The total minimum auto-enrolment contribution is scheduled to rise from 2% of earnings to 5% from October 2017 and 8% from October 2018. The minimum contributions for employers will rise from 1% to 2% from October 2017 and 3% from October 2018.
The ACA is concerned that low earnings and the short period of time between small firms’ staging dates in 2015/16 and the rise in minimum contributions in 2017/18 could cause problems.
The report suggests that the next government should launch a review of current auto-enrolment policy after the general election in May.
The ACA survey of more than 400 employers with less than 250 employees and found that:
- the average employer contribution for newly-enrolled employees is between 1 and 3% of earnings
- the average newly-enrolled employee contribution is between 1 and 2%.
David Fairs, chairman of the ACA, said:
“In the near-term government may need to be pragmatic and consider some targeted financial incentives to help deliver the desired policy outcome of wider and deeper pension coverage in smaller firms.”
We can help you prepare for auto-enrolment. Talk to us today.
