Financial planning firm Henwood Court has written an open letter to Chancellor George Osborne calling on him to abandon auto-enrolment for firms with fewer than 50 employees.
Henwood said the small firms it advises fear going out of business if the government continues with the implementation of its auto-enrolment rules for workplace pensions.
The firm also warned that auto-enrolment could become an opportunity for "unscrupulous elements of our industry" to pray upon time-pressed business owner to sell unnecessary products or auto-enrol employees into old, heavily charged pension schemes which offer no value.
Employees of the country's largest firms began being automatically enrolled into qualifying workplace pension schemes October. The governemt said the changes will give up to ten million people access to a workplace pension scheme for the first time.
Firms with 50 to 249 staff must implement the scheme between 1 April 2014 and 1 April 2015; those with 30 to 49 staff between 1 August 2015 and 1 October 2015; while those with fewer than 30 qualifying workers must implement the scheme between 1 January 2016 and 1 April 2017.
In the letter, Henwood said: "The reality is that many small business owners are genuinely concerned that the additional financial burden of providing for auto enrolment will push many of them over the edge.
"While employees are hardly doing cartwheels in anticipation of joining a pension scheme, as this will invariably be at the expense of a pay rise (how else will this be funded)."
An abandonment of auto-enrolment now for firms with less than 50 employees would allow small business owners to concentrate 100% on growing their businesses, and in turn tax revenues and the UK economy, the letter stated.
"An exemption would allow business owners to consider pension costs when they are looking to expand, and consider them alongside any other costs associated with expanding their workforce, costs such as salaries, national insurance and the need for bigger premises," it said.
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
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