Smaller companies need to emulate the success of their larger competitors in encouraging employees to stay in workplace pensions, say experts.
It comes as figures from the Pensions Regulator suggest auto-enrolment (AE) opt-out rates may be higher among smaller companies than larger companies. Larger employers that have auto-enrolled have 23.11% of staff outside the workplace pension compared to 25.99% across all employers that have auto-enrolled. While this includes staff that would have been automatically enrolled but opt-out, it also covers part-time workers and those under the age of 22 who would not have been put through AE.
Hargreaves Lansdown senior pension analyst Nathan Long warned around 630,000 more people could be in workplace pensions if smaller companies did more to promote the benefits of the scheme to their members.
He said despite big companies such as retailers typically employing a larger number of young or part-time workers who would not have been automatically enrolled, they have managed to get a greater proportion of staff into pensions.
Whereas smaller employers may lack resources to be able to encourage employees to the same level as they may only aim to be compliant.
"It is not really that small employers do not want it," he said. "It is more of a resource issue. Smaller companies just want to tick the boxes in terms of compliance. For lots of smaller employers now, this might be the first time they have engaged with pensions."
Long added these employers could take small steps to advise their staff better.
He said: "AE is a cost to them as a business. They might as well get their staff involved by using something like financial education and explaining how this fits into wider finances. This might include running a couple of days on site about pensions."
However, small businesses have warned they may be forced to cut staff or initiate a pay freeze in order to afford the costs of AE.
A new survey by the International Association of Book-Keepers (IAB) has found that one in five small businesses believe competition means they cannot raise prices on their products, and will have to reduce their costs instead.
Long admitted small businesses may find they do not have the staff or time to advise staff about the pension scheme.
He said: "Probably, the priority for them is to make sure they tick the box for compliance. Imagine you are the owner of a ten-man company. The person it will fall on to make sure you have sourced a pension scheme is the same one who has a day job of running the company."
"It is a possibility that there will be pay freezes. It was talked about by large and medium businesses, but we haven't seen much evidence of that coming through. But, it might be a thing that smaller businesses thing they have to do."
By the end of last month, auto-enrolment (AE) had brought 6.3 million people into pensions across 143,000 businesses since it was introduced in 2012, according to TPR's data.
Last month, small employers were warned to ensure they have declared to the TPR they are AE compliant, even if they have no eligible employees. First Actuarial founder Alan Smith said that small employers could be fined £400 if they fail to submit the form within the next 17 months.
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