Small business leaders are warning that new pensions regulations are going to place a new administrative burden on directors.
Owner-managers in the West Midlands say the automatic enrolment pension scheme, due to come into force in 2012, is going to create more unnecessary red tape.
The Federation of Small Businesses (FSB) is calling for all micro businesses – those with 10 employees or less – to be exempt from the scheme, under which they would be expected to automatically enrol all members of staff onto a pension.
The Government announced this month a new one-in, one-out policy on red tape to cut down on burdensome regulation.
Ian O’Donnell, managing director of web design firm Real Point, in Meriden, spends in the region of £200 a month on pension contributions for his six members of staff. He said the new legislation, which followed a Government consultation entitled Review of Automatic Enrolment, would be a burden both on small firms’ finances and time.
He said: “The difference is with the current system you have to opt in. There is a lot more paperwork with this new system.
“You have to put everyone into the pension scheme and if they want to opt out you take them out of it.
“For a small company without a HR team it is an unnecessary burden. There is also a cost issue.”
There is currently no legal obligation for staff to join a pension scheme, or for employers to contribute.
However, the Pensions Act 2008 introduced reforms that will give more people more access to pension savings and the duty on employers to automatically enrol all of their eligible staff – and make contributions – kicks in from 2012.
Currently, all of Real Point’s employees are signed up to its stakeholder pension scheme and the firm pays a 50-50 contribution up to the first £50.
Mr O’Donnell added: “I can see that something needs to be done about the pensions burden to try to encourage people to save money but there hasn’t been guidance and there is too much of an administrative burden.
“As with all of these things, the burden has been placed on the small business owner and not the Government.”
He added: “I haven’t seen much red tape taken out. The main red tape we have to deal with is around the payroll.
“There is an awful lot of stuff we have to deal with in terms of administration, like pensions, student loans, National Insurance and now this.”
It has been claimed that last year regulations cost UK firms a total of £88.3 billion.
As a result, the Government has vowed to identify an existing piece of regulation which is hindering businesses to be removed for every new rule proposed.
Bruce Undy, Warwickshire chairman of the FSB, called on the Government to raise awareness of the default pension scheme to ensure that the “ticking time bomb” doesn’t hit small firms without warning.
He said: “We know that small firms do not feel confident in choosing a pension scheme because of its complicated nature and we are thoroughly disappointed that five years on from the original proposals, the pensions industry has yet to come up with an efficient system to cater for micro firms.
“The FSB is calling on the Government to make micro firms exempt from the automatic enrolment scheme and improve proposals for small firms.”