Small Businesses Pledge to Pay Over the Auto-Enrolment Minimum
“Generous” small firms to increase pension fund in order to attract and keep talent, and provide their employees with a comfortable retirement
The number of small and medium enterprises planning to contribute more than the legislative minimum into auto enrolment workplace pensions has nearly doubled to 30%, compared to 17% last year, according to research by NOW: Pensions.
The survey, which featured 400 small businesses, indicated that the reason for the increase is because entrepreneurs are “waking up to the benefits of auto-enrolment” with 57% of businesses surveyed citing attracting and retaining employees as a key motivator to increase employee pension pots.
Furthermore, 39% of the companies surveyed said that they thought the minimum contribution (a combined pension input of 8%) is too low for a comfortable retirement. 24% admitted that as, they currently offer no other benefits, they are satisfied with paying more into their staff’s pension.
In regards to the 30% of small businesses who intend to pay more, 17% hope to do so from the offset with 13% stating that they will contribute the minimum initially but that they will increase this as the plan progresses.
Despite the ‘minimum contributors’ agreeing that a good pension will help retain staff and increase company appeal (44% and 36% respectively), the majority of business owners (44%) are doing so to ensure compliance.
A further 24% say they are paying the minimum pension so that they can keep costs down while 16% of businesses wish they didn’t have to offer pensions at all.
NOW: Pensions CEO, Morten Nilsson, commented:
“The perception is that large firms offer more generous pensions than small companies but, this isn’t necessarily true. Many small employers want to offer their staff a benefit they’ll genuinely value and are willing to put their hand in their pocket to do so.
“There’s a danger that, because the government has set the contribution level, employers will assume that auto enrolment minimum contributions are sufficient to provide a comfortable retirement for their workforce… If employers contribute even a small amount more than they are obliged to do, this can make a big difference to employees’ final pension pots.”
Over one million small and medium enterprises still haven’t signed up for auto-enrolment, for more information on auto-enrolment check out Startups.co.uk’s guide here.