Small company employees - pension contribution concerns

New research suggests that small business employees are making insufficient contributions to their pensions.

The study of 200 SME's, conducted by Barclays Financial Planning, revealed over half (51% of these employers are concerned their employees are making insufficient contributions to their pensions and are actively encouraging their staff to increase them.Interestingly, a massive 19% of the employees working for the companies surveyed make no contribution at all to their pension.

Particularly worrying are the figures highlighting that a substantial number (19%) of the employees working in these companies do not make any contribution at all to their pension.

Other Survey Highlights

The gap between what employers on average contribute towards pensions as a percentage of pre tax salary versus what their employees pay is marginal (4.82% versus 4.78%).

However, one third (29%) of employers put in over 6% of salary towards a pension on behalf of their employees.

Across the UK, 55%of members of defined contribution occupational schemes in the UK contributed less than 4% of their salaries.

Just one in four companies have total pensions take up by potential employees and a further 37% have less than 25 per cent of employees in the company pension scheme.

Short-Term Thinking?

Commercial Director for Barclays Financial Planning Stephen Ingledew said:

“The research indicates despite the pension gap being on everyone’s radar, it is some way off being plugged. The fact that half of SMEs are taking steps to encourage their staff to do more is promising, but with two fifths of employees preferring a higher pay packet to a better pension deal, there is a danger pension provision could be overlooked in favour of more disposable income in the short term.”

It is worth noting that although this survey involves the employees of small businesses, entrepreneurs themselves are notorious for shunning pension arrangements, as our 2006 story suggests.

You can read more about small business pensions (and the new pensions simplification rules) here.