NEST & PA
National Employee Savings Trusts (NEST) aka Personal Accounts (PA) will be the new government run employee pension scheme.
Cost: 8% of salary: 4% employee, 3% employer, 1% tax relief
NEST is targeting ‘micro employers’ – an employer with less than 50 Staff. It will be a criminal offence for employers not to have a pension scheme even if there are no eligible employees. There must be a pension scheme available in the event that an employee chooses to be part of it. The employer can either sign up for the Government NEST scheme or set up an exempting scheme.
Auto enrolment will take place on an employee’s 22nd birthday. Not before, or after that date. Employees up until the age of 75 can be enrolled by choice. Employees aged from 16 to 22, and those between State Pension age and 75 who are earning more than £5,035, will be able to opt in to their employer’s workplace pension thus qualifying for the compulsory minimum employer contributions.
Those earning less than £5,035 a year may opt into their employer’s workplace pension, but the employer is not required to make a contribution, but may do so if they wish. The maximum applicable earning is £35,540.
Employers must provide pension information to employees at the time of auto enrolment but MUST NOT give advice – This would be an offence, and fines will be applied.
There is no ability to transfer a pension fund in to or out of NEST.
Setting up a NEST scheme will be highly restrictive for the employee and potentially an HR headache for the employer. Setting up an exempting scheme will allow for greater flexibility for both employer and employee with the employee having far more options open to them. It should also make life easier for the employer and the HR department.
Due to the embryonic status of NEST, the rules & definitions appear to be changing week by week and it would seem the cost to the UK government is spiralling.
For specialist advice on pension schemes and a more thorough understanding of NEST, please contact Orchard House to speak with a pension specialist.
