For most printers, worrying about something that may not have an effect until 2014 won’t be at the top of the agenda. But with widespread pension reforms being introduced from next year, it is crucial that the industry gets itself ready now, rather than bury its head in the sand.

The government has introduced the reforms, which will kick in from 2012 for the largest companies and hit progressively smaller businesses over the next four years, because there is a genuine fear that people are not saving enough for retirement.

With many in the UK saving for investments such as houses, people are not thinking ahead – and with people living well into their 80s now, why would you be preparing for retirement at 29? However, the government is faced with a very real problem that could rear its head in around 50 years’ time: a generation of poverty stricken pensioners that will need to be supported with government funding.  A lot of it.

On the face of it, the key element of the reforms is very simple: if you employ somebody over the age of 22 with a salary of at least £7,475 a year you have to enrol them into a pension scheme and contribute towards it – eventually 3% of their salary – no matter how small your company is.

Companies with 120,000 employees or more will have to start doing this from 1 October next year, while businesses with less than 50 employees won’t be affected until at least 2014 (see below).

When will the changes affect your business?

For most of the industry, this means there are probably three and a half years before the changes actually take effect and BAPC chairman Sidney Bobb doesn’t expect many of his members to act swiftly.

"For small companies, it is too far away to get a reaction," he says. "Last time there were major changes to the pension regime in the early 1990s, most companies acted at the last minute. Many are questioning whether they will be in business then, whether they will survive; they aren’t concerned by something that doesn’t immediately affect them.

"But if something is coming up and you know about it, you should be looking into it as soon as you can, otherwise it can come back and bite you."

This issue, however, it is not as simple as it might seem and will require preparation well in advance. Larger businesses will likely have schemes in place, not to mention a team specifically tasked to deal with it. For companies employing a handful of people, the effects could be massive, both administratively and financially.

The Forum of Private Business (FPB) senior policy advisor Phil McCabe says: "Business owners are worried about their exact liabilities and obligations under the scheme. There is also a lot of confusion over whether or not some businesses’ existing pension schemes will meet the relevant requirements, and therefore mean that they don’t have to enrol employees in the scheme."

It is not merely a case of looking up the date the changes will affect your business, either – employers will need to find a suitable scheme, and there are a lot out there. At this stage, information on available schemes is thin on the ground, although the FPB believes that the Pension Regulator will make more information available once it provides more information on duties.

Another thing to worry about for small employers is that employees may lose out in the immediate future. Essentially, auto enrolment forces an employee to have a pension, which will take from their bottom-line salary. With many people saving for houses and other large investments, a cut in take-home pay will not be welcomed and may trigger calls for more pay rises.

Of course, the other worry for small businesses is the additional cost that is sure to come from complying. The FPB’s McCabe adds: "Many small business owners feel that, at a time of rising costs and economic uncertainty, it’s very unfair they are being hit with a significant additional cost.

"Many of our members have also pointed out they pay towards their employees’ state pensions through employers’ national insurance contributions – in theory at least." 

So the message is clear: these changes will impact all employers and are going to cost you and take up more of your time. Of course, you could ignore it until the date arrives. But, for many, there are four years to prepare, so surely it makes sense to do everything you can in advance.

30-SECOND BRIEFING
• Auto enrolment will be implemented in a staged approach from October 2012 through to 2016
• Key dates covering business with as few as 50 employees have been plotted through July 2014
• Once the scheme is implemented, a business will have to enrol every employee earning more than £7,475 and over the age of 22
• The amount is ramped up starting with 1% of salary from both employer and employee through to 3% from employer and 5% from employee. Dates of each stage depend on the business’s start date
• The Pensions Regulator will give notice to each employer 12 and three months ahead of their start date
• The government believes that £17.1bn of additional pension contributions from employers will be created by the scheme
• As yet, the system has not been completely formalised, with announcements due in the build-up to 1 October 2012
• Some existing schemes may fall under the criteria, although this won’t be clear until more detail is revealed