NEST Pensions

We are all living longer and apart from employer sponsored schemes, very few people are saving for their old age. This is a huge political problem. Previous Governments tried to solve it by introducing the concept  of Stakeholder pensions which had low costs. However, this initiative failed because the employer was not required to make a contribution

New Workplace pension reforms  are planned – to be phased in from October 2012. From that date all employees in the UK earning more than £7,475 must be automatically enrolled into a workplace pension. This can either be a private scheme run by the employer, or the new Government Scheme called NEST (National Employment Savings Trust)

What is NEST?

A new simple, low cost pension scheme, NEST (National Employment Savings Trust), formerly known as personal accounts, will be introduced as one such qualifying scheme. The intention is that NEST will operate like any other trust based, multi-employer defined contribution occupational pension scheme, but it will be focussed on a target audience of low to moderate earners.

As an employer you will have a number of choices

1 If you already offer all your staff a pension arrangement, this can be a defined benefit,(final salary) defined contribution (money purchase) or Group Personal Pension, you will need to ensure that the eligibility rules are changed to allow automatic entry and you will need professional help to check the scheme to make sure that it meets the legal requirements.

2 If you only offer your scheme to a certain section of your employees you will need advice as to whether it is advantageous to extend membership to the whole staff or to use the Government scheme NEST for some section of your workforce

3 Even if you do offer your own scheme to the majority of your workforce you may wish to consider using NEST for new joiners or seasonal workers

4 If you currently offer no scheme you will need to consider whether in future you need to offer your own private scheme or to opt to place your workforce in NEST.

Whichever choice you make  you need to realise that this will cost you money and you need to get value for the expenditure. The value that potentially you will receive is that the employees realise that they are being given a worthwhile benefit which allows them to save, with your help into a well run scheme which will give returns in line with their attitude to risk. Both you and the employees will need help

we would strongly recommend that you take advice from specialist advisers who work on a fee basis and therefore have no bias towards a particular outcome.

Nicholls Stevens have been offering advice to employers on workplace schemes for over 20 years.

You may like to see the basic details of the NEST Scheme

These are some of the Key points of the new NEST  scheme:

• The total minimum contribution to all  retirement savings accounts will have to equal 8% of  qualifying earnings.
• Of this 8%, the employer will have to contribute a minimum of 3%.
• To the members contributions of 4% is added 1% tax relief
• Contributions will be phased in and increase gradually to the minimum level by 2016
• Companies with a large work force will be the first to conform to the legislation, which will be phased in between October 2012 and August 2014
• Employees  will be able to opt out of the workplace pension scheme their employer has provided if they choose. However, they will automatically be enrolled and then must make the specific decision that they wish to opt out.