Auto-enrolment changes could place additional burden on small businesses

Proposed changes to auto-enrolment pensions will cause additional financial worries for small and medium-sized enterprises (SMEs), according to the Federation of Small Businesses (FSB).

Their concerns comes after the Department for Work and Pensions (DWP) indicated its intention to extend auto-enrolment to younger workers, whom it says deserve “the same opportunities” to a build a “secure retirement” as their older counterparts.

It is thought that the proposed change, which will be officially put forward as part of an upcoming Government review, will require SMEs to automatically enrol any workers aged between 18 and 21 who are earning £10,000 or more into a workplace pension scheme.

Mike Cherry, Chairman of the FSB, has warned that the change will not come cheap. He said: “Employers are already seeing the cost of employment rising significantly and, by 2019, employer contributions for pensions will triple to three per cent.

“Changes to ‘banded earnings’ and extending the minimum qualifying age will burden small firms with yet more costs, so the Government will need to keep this in mind as it looks to review the system over the coming years.”

He warned that “requiring employers to contribute from the first pound of earnings” would eventually cost “hundreds of thousands of small employers” approximately £180 more per employee per year.

“For employers in certain sectors, such as care and hospitality, where margins are tight this will really add up,” he said.