Advisers fear erosion of trust as govt delays pension reform

Delays to pension reform will heighten rather than ease firms’ anxiety about being ready for auto-enrolment, advisers claim.

Small employers’ trust in the government is being eroded as a result of its delay to pension reform, advisers have said.

In last week’s Autumn statement, Chancellor George Osborne announced small firms will have extra time to prepare for auto-enrolment reforms.

Firms with fewer than 50 employees will not have to begin automatically enrolling staff into workplace pensions until 2015; one year later than under the previous timetable.

All firms with between 51 and 3,000 employees, which are due to begin auto-enrolling after July 2013, will also have their staging dates reviewed. Any changes here will be confirmed in January.

Suspicious

However, despite pensions minister Steve Webb’s reassurance there will be no further alternations to the timetable, small businesses are suspicious of extra changes.

“Businesses I serve are aware of auto-enrolment and some have made contingency plans, but they do not know if the rules will change again,” said Yvonne Goodwin, director of Yvonne Goodwin Wealth Management.

“They are putting in place measures but they are worried that in a few years this will not be considered enough and they will have to change it all.”

Procrastination

Malcolm Steel, chartered financial planner at Mearns and Co, said some business owners are slow on the uptake with pension reform and the delay will only make this worse.

“Some people believe the retail distribution review (RDR) will be scrapped, so it is perfectly possible others will believe auto-enrolment will be scrapped altogether as well and delaying it might send this message,” said Steel.

“However, we always advise our small business clients to set up a pension scheme if they can as it is better to do this ahead of compulsion and be positive about it, rather than do it because they have to.”

The Department for Business, Innovation and Skills has said the reforms are likely to cost UK businesses around £3bn.