The new government pension plans could lead one in two small and medium-sized business employers to level down or close their company pension scheme, according to a new report.
The research by Barclays found that 31% of employers expect to continue with their current pension plans but reduce contributions, while 18% expect to close their current schemes when they join the new National Pension Savings Scheme.
The study also revealed that the changes could cost businesses much more than expected, with a mid-size company paying an extra £60,000 per year.
The findings come just days after Francis Chittenden, Professor of Small Business Finance at the Manchester Business School, estimated that the real cost to business could be as much as £1.2bn in total.
This is in stark contrast to the Department of Work and Pensions’ (DWP) estimate of £254m for the first year and an annual £90m thereafter.
“This is a serious issue for small businesses. The government plans to introduce Personal Accounts at a time when it is undertaking an exercise to reduce admin burdens,” said Chittenden.
“The DWP proposals risk substantially increasingly the amount of work that small firms have to do on behalf of government.”
However, Stephen Ingledew, director of Barclays Financial Planning urged firms to see the postive side of changes to pension system.
“I would urge companies to take note of the changes and use the lead time until they are implemented to realise the financial and motivational benefits for their workforce of a good company pension scheme,” said Ingledew.
© Crimson Business Ltd. 2006
