Pensions Auto Enrolment (incorporating NEST)

Background 

Government figures suggest 7 million people have a pension’s savings gap and following publication of an independent review commissioned by the DWP, “Making Automatic Enrolment Work”, the Government confirmed on 27 October 2010 its commitment to the proposed requirements on employers to auto-enrol eligible employees for pension provision from 2012.

This will see Employees and Employers being required to make compulsory pension contributions for all eligible employees into a ‘Qualifying Workplace Pension Scheme’ (QWPS). The QWPS will be either an employer sponsored pension arrangement that satisfies specified quality tests or a new solution (National Employment Savings Trust), more often referred to as NEST.

Below we have outlined the core details surrounding this significant change, but for more specific detail please visit our auto enrolment site at www.cobensautoenrolment.co.uk.

New employer duties

Our current understanding is that large employers will be expected to start contributing in 2012, with smaller employers having phased in compulsory contributions between 2012 and 2015. Employers will have a duty to automatically enrol their eligible employees into a good quality employer pension scheme.

It is currently expected that the total contribution will be no less than 8% in total. This being made up from:

3% employer contribution

4% employee contribution

1% tax enhancement

8% Total

Employees, once in the scheme will NOT be allowed to transfer the money out. It is envisaged at this stage that NEST will offer a range of 4 government run funds and will be administered by TATA Consultancy Services (TCS).

The scheme will be a trust based occupational scheme that will mean employers who opt to offer NEST will need to embrace the occupational scheme levies currently imposed on all occupational pension schemes.

Charges

For employers

Employers will need to fund the implementation, administration and any advice to employees themselves in addition to the compulsory contributions. At this stage, it seems that employees will all be entered into the scheme and will be offered an opt-out facility rather than the current default for employees to opt in to their pension scheme.

For employees

Members of the scheme will see 2% of each contribution they make disappear in charges, the Government revealed.  This comes in addition to a 0.3% annual account management levy on their pension pot.  Together the cost could work out more expensive.

The scheme rules have not yet been cast in stone. If you would like to be kept informed as NEST develop, please complete the enquiry form and we will be happy to keep you up to date.

Why Cobens?

We are working with all our clients and prospective clients to find the best solution to the whole question around pensions. Looking to see if NEST is the right solution or whether the more traditional and much more flexible Group Personal Pension scheme would be a better alternative?

For more information or to arrange a meeting to discuss this in more detail, please contact us and we will be happy to arrange this at your convenience.