Reforms to the pension scheme are in the pipeline (implemented by the Pensions Act 2008) which means that from 2012 onwards every business will be required to have a pension system in place. Employers will be expected to provide a pension scheme and make contributions where they perhaps did not do so before. The idea behind the move is to encourage more people to save for their retirement, but it necessarily has a knock-on effect on business. Clearly implementing such a change will mean higher costs for some business owners and reduced take home wages for their employees, though there is the option to opt out of the scheme.
NEST (National Employment Savings Trust) is a Government backed scheme intended for employers to use to meet the minimum requirements placed on mandatory pension starting in 2012. www.nestpensions.org.uk will be the official website, due to be launched in 2011. NEST is intended to be a low cost alternative for employers. It will be run by a not-for-profit corporation of the same name.
Although use of NEST is not mandatory in itself and employers may choose to adopt another scheme, they must still meet the set minimum standards laid out in the pension reforms. All employers will also be required to register their pension schemes with The Pensions Regulator.
The Minimum contributions for NEST are shown below. Although it is said that these rates will be introduced slowly over the space of a couple of years.
- 4% from employee earnings;
- 3% from your employer;
- 1% from the Government through tax relief.
For more information see:
The Pensions Regulator website,
Personal Accounts Delivery Authority, and the
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