The Government announced in the Autumn Statement that they are going to delay the auto-enrolment scheme by a year for small businesses, in a bid to relieve financial pressure on smaller firms. 
The original plan was for all employees working for small firms with staff of less than 50, to be auto-enrolled into a pension scheme, beginning in April 2014. The new date announced means a delay of 12 months and moves the start date until after the next general election in May 2015.
Larger companies who employ more than 50 people will still have to roll out the new scheme in October 2012, but the change will potentially leave at least 4 million workers out of pocket by an average of £214 a year in their pensions.
Julian Webb, the Head of Workplace Saving Business for Fidelity, a fund management group, said: “The impact of just one year’s delay is very significant because of compound interest on investments made. This will have a long-term and lasting impact,”
The delay is likely to hit the people it was set up to help the most, as people employed by small companies are the least likely to set up a pension scheme.
The delay will also have a knock-on effect on employees of larger companies too, as any contribution increases applied in the future will also be delayed, meaning less money for all employees in their final pension pots.
“The increase in contributions can take place only once all employers have been subject to auto-enrolment, so by delaying it for small businesses, it delays everyone,” says Mr Webb.
Employees near to retirement age will be hit the most by the delay, as they will have less time to make up the difference. Fidelity have calculated that this delay will cost an employee on average wages £214 a year, whilst only saving the employer £663 over seven years. A 50 year old man who is due to retire at 65 would lose 10% of his pension income.
Older workers, in particular, need to build up their pension pots following the Government announcement to raise the retirement age to 67 in 2026, eight years sooner than originally decided.
Under the new auto-enrolment scheme, company bosses will be required to offer their workers a pension and contribute a minimum of 3% towards it. Employees can opt out of the scheme but the Government hope that the majority will remain with the scheme and make a positive change towards saving for their retirements.
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