With over 18,000 SMEs reaching their auto enrolment staging date in April and May, new research from NOW: Pensions reveals that nearly one in five (17%) employers plan to contribute more than the legislative minimum when they enrol their employees into a workplace pension.
Of the 450 SMEs surveyed, 8% say they intend to pay more than the minimum with a further 9% stating that they will pay the minimum initially, with a view to increasing contributions over time.
A more generous pension for recruitment and retention
Over half (56%) of those surveyed who intend to pay more than the minimum say they believe it will help with the recruitment and retention of employees. Four in 10 (43%) think the minimum employer contribution has been set too low by the government. More than a third (39%) hope that by contributing more, their employees will be encouraged to do the same. Nearly a quarter (24%) say they don’t offer any other benefits so are happy to spend a bit more on providing a more generous pension.
Of those that intend to contribute more than the minimum, over half (54%) haven’t decided how much more they’ll contribute while nearly a quarter (24%) say they intend to contribute 1% more than the legislative minimum – a figure that over time, could equate to an additional £49,296 in the pension pot of someone on an average UK salary.
Morten Nilsson, CEO, NOW: Pensions said: “The perception is that large firms offer better pension provision than their SME counterparts but this isn’t necessarily true. Smaller companies very often know their employees personally and have a more paternalistic attitude.”
Compliance top of the agenda
Of the 40% of firms that plan to make minimum contributions, four in ten (41%) say it is because their focus is on ensuring compliance. A third (33%) claim they want to keep things simple and think paying more would complicate matters, while over a quarter (26%) say keeping costs low is a priority. A further one in five (21%) say trading conditions are difficult so they are tightly managing their employee remuneration.
Nilsson continues: “Auto enrolment is a legal obligation but many companies are waking up to the benefits of offering a more generous pension package.
“The reality is that a combined pension contribution of 8% isn’t going to be enough for most people to have a comfortable retirement. 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.”
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