Personal Accounts (NEST)

From October 2012 one of the biggest changes to UK pensions in 30 years is happening. It is called ‘auto enrolment’ and this means that employers will automatically have to enrol all eligible employees into a qualifying workplace pension scheme. This means that even if a company only employs one person in addition to the owner, then a pension has to be put in place with the employer contributing a minimum of 3%, the tax man 1% and employees 4%.

If an employer already provides a pension scheme, this pension will have to be assessed to see if it meets the rules laid down by the Department for Work & Pensions (DWP). If it does not then the older scheme will have to be enhanced to meet the new rules or abandoned in place of a better one.

The Government has put in place a default pension option for those employers that do not want to establish their own pension scheme. This is called ‘NEST’ (National Employment Savings Trust) or more commonly ‘personal accounts’. There is a large number of legal requirements to meet including compulsory employer contributions, annual authorisation with the pensions regulator, automatically enrolling all eligible employees into the scheme and even if the employee opts out of the scheme, the employer has to automatically enrol them every three years. Failure to do this can lead to significant fines.

The legislation is being introduced over 4 years starting in October 2012. With only 30% of employers currently offering pension schemes in the UK and that increasing to 100% by 2016 this is a mammoth task for pension providers, the DWP and employers alike.

Expert advice is strongly recommended.