National Employment Savings Trust

Monday, April 5th, 2010

National Employment Savings Trust (NEST) is the Government’s new solution to tackle Pension Reform.  The scheme is aimed at all business that have MORE THAN 1 employee on their payroll.  Rollout will be between 2012 and 2016, depending on the size of the payroll.

This replaces what was previously known as the “Personal Accounts Pension Scheme”.  The driving factor behind the scheme is the prediction that the over 65’s will double between now and 2055.  Statistics indicate that 7 million future pensioners are not currently saving enough to meet their needs through retirement.

The onus will be on the employer to administrate the scheme, with (surprise surprise) heavy penalties as the stick.  Not only will employers be responsible for administration, they will also be required to contribute to the employee’s pension.  “Opt Out” is an option that only the employee can choose, but a scheme still needs to be in place to opt out from.  Most SME employers will be affected from 2014.

The Rollout is scheduled as:

Payroll Size (E/ees)   Staging Dates

10,000+    Between 01/10/12 and 01/03/13

500 – 9,999    Between 01/04/13 and 01/11/13

50 – 499    Between 01/01/14 and 01/07/14

< 50     Between 01/01/14 and 01/02/16

New Companies (ALL SIZES) From 01/04/2012

The Scheme will result in a minimum of 8% of earnings between £5,035 and £33,540 going into the Pension pot for each “Eligible Job Holder aged between 22 and 65”.  The 8% will be constructed from 3% Employer contributions, 4% Employee contributions, and 1% tax relief from the Employee’s contribution.  This level of mandatory contribution will be in place by October 2017.

An Eligible Job Holder is anyone with a contract of employment (written or implied) working in the UK and between the ages of 16 and 75.

The Government intends to make a charge on all schemes of 2% to recover costs of their administration (NB 2% is significantly higher than most private pension schemes).  TATA (an Asian owned organaisation) were the only organisation in the final tender round for the job of handling the scheme.  Formal contracts were alledgedly signed just over a week ago.

Employers need to start thinking seriously about their strategy for this new regime.  The impact on any business might be bigger than expected if it is not planned and handled sensibly.

JCM/10/04/05

Tags: National Employment Savings Trust, NEST, pension reform, personal accounts pension scheme
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