From 2012 the government is set to introduce compulsory workplace pensions, effecting vast numbers of employers, from the largest to the smallest.

The reform will be carried out in stages, so won’t apply to businesses with fewer staff to start with. According to the Federation of Small Businesses (FSB), companies with ten employees or less should always remain exempt as the complicated pension scheme is impractical for these small firms.

Mike Cherry, policy chairman for the FSB, says: “We know that small firms do not feel confident in choosing a pension scheme because of its complicated nature and we are thoroughly disappointed that, five years on from the original proposals, the pensions industry has yet to come up with an efficient system to cater for micro firms.”

The FSB is lobbying the government to make those micro firms exempt from the automatic enrolment scheme and create an improved proposal for this group.

Pension reforms will initially affect employers with over 30,000 staff, which will be forced by law to offer their workers a company pension scheme in 2012. From 2013, companies with more than 350 employees will be obliged to take part and then, from 2014 – 2016, all remaining businesses will be subject to the same rules.

Qualifying companies will see their employees auto-enrolled and can expect to put a minimum 3% of any earnings between £5,035 and £3,540 into each worker’s fund.

To help low to moderate earners and their employees, the government is introducing NEST – National Employment Savings Trust