The London Society of Chartered Accountants has warned that thousands of Britain's employers could risk fines up to £50,000 because they do not understand new pension rules being introduced this month.
New research reveals that a third of small to medium-sized companies (SMEs) that do not currently offer a staff a pension scheme do not intend to provide access to the new stakeholder scheme for employees.
The research conducted among 500 directors of SMEs, also revealed that 37 per cent of companies have no understanding of the rules and regulations surrounding the new initiative.
Howard Gross, deputy chairman of the LSCA and chairman of its financial services committee said:
"The research shows that a worrying number of businesses don't have a clue about the new law. Later this year there is going to a great problem. Although the Department of Social Security has launched a public awareness campaign it has so far failed to promote details of employers' obligations. You can't have one without the other," he said.
The stakeholder pension is a scheme to help the three million employees who earn between £10,000 and £20,000 a year and do not have a pension. New legislation says that firms with five or more employees will have to provide access to a pension scheme. This can either be stakeholder-compliant or a recognised alternative pension.
The initiative is a low-cost pension with a maximum annual charge of one per cent. Contributions from employees receive tax relief and can be as little as £20 a month or up to £3,600 a year.
"The Government has set the deadline of 8 October after which firms will face penalties if no access to a pension has been granted. Although the Occupational Pensions Regulatory Authority (Opra) has said it will take a lenient stance, if thousands of businesses fail to meet the deadline, it could take months before Opra can investigate and impose a penalty. It is up employers to be truthful to staff about their commitments," added Mr Gross.
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