What?
The National Employment Savings Trust, or NEST for short, officially opened for business in October 2012. It is a defined contribution occupational pension scheme available to UK employers and the self-employed. NEST is run by NEST Corporation, a non-departmental public body accountable to Parliament.
Why?
Having seen that the Stakeholder legislation in April 2001 failed to encourage individuals to save for their retirement through voluntary contributions into an employer arranged scheme, the Government decided it had to force people to save.
It has been 6 years since the White Paper announced NEST (originally known as Personal Accounts), and is part of the Government’s Pension Reform, aiming to get people to save for their retirement so they don’t have to rely only on the State Pension.
In order to achieve its aims, the Government has placed the responsibility onto the shoulders of employers, who are obliged under the Pensions Act 2008 to automatically enrol eligible workers into a workplace pension scheme that meets certain standards. Both the employer and employee are obliged to pay into the scheme.
When?
Large employers need to comply first, with medium and smaller employers following later, with all employers complying by 2018. When you are obliged to automatically enrol staff depends on the size of your business and your PAYE reference number, and The Pensions Regulator is expected to write to businesses 12 months before their Staging Date (i.e. date to comply).
When due, employers must automatically enrol eligible workers into a suitable scheme and pay minimum contributions. The company payment is a minimum of 1% of qualifying earnings and will rise to a minimum of 3% by 2018. Eligible workers will be required to contribute, ending up paying a gross contribution of 5% of qualifying earnings from 2018.
Where?
You are obliged to provide your eligible workers with access to a qualifying scheme. NEST is just one of the options you can choose for a new arrangement if you do not have one already available. You may also consider establishing a Group Personal Pension, Group SIPP, Group Stakeholder or even an occupational scheme (either money purchase or final-salary related) – as long as they meet the qualifying standards such as auto-enrolment and minimum contributions.
Existing company pension arrangements may already meet, or exceed, the new requirements but you must ensure all qualifying standards are met in full.
Who?
Fiducia recommends that you contact us at least 6 months before your duties start. The Pensions Regulator website will be able to guide you as to when you must comply. http://www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx
Fiducia will then talk you through your obligations, and agree the most suitable arrangement for you to offer your staff. You may have an existing arrangement that fulfils most of the new requirements, so making small changes can make the plan qualifying. If you have no arrangement in place, depending on your choice of future pension Fiducia can recommend, establish and enrol employees on your behalf.
Summary
Some people see NEST as the third tier of State arranged pension, after the Basic and Second State pension which are funded through compulsory National Insurance contributions.
Fiducia sees it as an opportunity to provide quality retirement planning to staff, educating them as to the value of saving for their retirement. It will also benefit the business-owner, since providing a quality pension arrangement which offers flexible features and benefits over and above the minimum scheme standards will demonstrate you clearly value them.
Do contact your Fiducia wealth manager to assist you in making the right decision.
Simon Bonnett
Head of Wealth Management