Ahead of the rolling out of the auto-enrolment pension scheme legislation in the SME sector in June 2015, research by workplace pensions provider NOW: Pensions has revealed that 5 per cent of SME employers in the hotel and catering industries plan to contribute more than the legislative minimum when enrolling their employees, with one in ten (10 per cent) intending to increase their contributions over time.
In the service industry, 12 per cent of employers are planning to contribute more than the minimum with a further 8 per cent expecting to increase their contributions later on.
Over half (56 per cent) of all employers surveyed who intend to pay more than the minimum say they believe it will help with the recruitment and retention of employees.
However, over half (54 per cent) of those that plan to contribute more than the minimum haven’t decided how much more they’ll contribute, though 24 per cent have set that extra contribution at 1 per cent. According to NOW: Pensions, this could equate to an additional £49,296 in the pension pot of someone on an average UK salary.
Automatic enrolment into workplace pensions started in October 2012 with the largest companies. In May 2014 over 12,000 firms employing between 90 and 160 people had to ensure they comply with the new legislation, and that will be extended to venues employing fewer than 30 staff by June 2015.
Employers’ minimum legislative contributions set out under the auto-enrolment law currently stand at 1 per cent for 1 per cent contributed by employees. From October 2017 to September 2018, that contribution will go down to 2 per cent for each 3 per cent employee contribution, and after that the ratio will be 5 per cent employee, 3 per cent employer.
Four in 10 (43 per cent) of SMEs think the minimum employer contribution has been set too low by the government, and more than a third (39 per cent) hope that by contributing more, their employees will be encouraged to do the same. For 24 per cent, a more generous pension is a way to make up for the lack of other benefits.
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. Auto enrolment is a legal obligation but many companies in the hotel and catering industry are realising the benefits of offering a more generous pension package.”