Concerns have been raised by MPs about how families who employ nannies, carers, gardeners and other staff will cope with the significant “burden” of automatically enrolling these employees into pension schemes.
Some 58,000 employers have placed 5.4 million people into workplace pensions as a result of automatic enrolment, which was introduced in 2012 to head off fears of a looming old age savings crisis.
But the Public Accounts select committee said that nearly two million small businesses and individuals could face costs of up to £2,000 under the scheme, which it warned would represent a “real test” as they have “fewer resources”.
Under the rules, even those who employ just one member of staff will, within three years, have to start paying into a workplace pension for the employee.
The report said: “We are concerned about the potential burden on small employers. Smaller employers have fewer resources to administer automatic enrolment and simplifying the process will be critical to the success of the programme.”
Committee chairwoman Meg Hillier said: “Auto-enrolment is entering a critical stage which will affect 1.8 million additional employers and their staff. It is vital people can understand, implement and have faith in the system.
“They are worried about it. We urge HMRC to step in an automate it as much as possible. If you are a business with one or two employees they might not think this applies to them. It does.
“This is not just small businesses in the traditional sense. This will affect lots of private individuals who employ carers, nannies and even gardeners.”
The concerns were raised at the same time HSBC released a report showing that almost nine out of 10 (87 per cent) people aged 45 and over said they dream of retiring in the next five years.
But 43 per cent said they were unable to, with 71 per cent saying they haven’t saved enough; 17 per cent have dependants who rely on their income and 13 per cent have too much debt to consider it.
The survey, which spoke to more than 18,000 across 17 countries, also found that people in the UK were more likely than their counterparts globally to say that their personal circumstances were a barrier to their retirement plans.
A Department for Work and Pensions (DWP) spokesman said: “We know that many people are not saving enough to maintain the standard of living they expect into retirement. That’s precisely why we introduced wide-ranging reforms to make pension saving easier, clearer and more sustainable.”
If you are a small firm, or individual, who will be required to pay into a pension for an employee, we can help. Alternatively, our knowledge can help you save more for your retirement. For further advice please contact the expert team at Birchwood today.