Food and farming businesses are likely to be disproportionately affected by new pension rules, according to rural accountant Old Mill.
The government’s new initiative will require employers to help their staff build up significant pension pots - meaning businesses with a heavy reliance on labour, such as horticulture and food processing, will be massively disadvantaged.
“The new scheme means employers must automatically enrol employees into a qualifying pension, and make a contribution equivalent to three per cent of their wages,” said Steve Woodham, pensions manager at Old Mill.
The new rules come into force from 1 October, 2012 for large businesses, and will be phased in over the following years, with employers of 50-90 staff having to comply by July 2014, and smaller firms between then and 2016, depending on the type of business.
Woodham said: “At present, many workers fail to take up valuable pension benefits because they do not make an application to join their employer’s scheme. Auto-enrolment is meant to overcome this. All workers between the age of 22 and state pensionable age who earn more than the basic tax level (around £7,000 a year) must automatically be enrolled into their employer’s qualifying pension scheme within three months of starting work. They then have the right to opt out, but must be re-enrolled after three years, when they could again opt out.”
Employers can choose the qualifying scheme they use, which could include the National Employment Savings Trust (NEST) - a new low cost pension scheme being introduced in 2012. They must then make a minimum three per cent per annum contribution, unless employees opt out of the scheme.
“Rural food producers are often very labour intensive, and will find these new regulations an added financial and administrative burden during financially difficult times. It is essential that they take professional advice to find out what they must do to comply with the new rules, and how they can mitigate the impact on their business,” added Woodham.
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