From October 2012 the UK Government will introduce a new pension scheme to the UK as part of a bigger overall pension’s reform strategy. The new pension will take the form of – The National Employment Savings Trust or NEST.

The Government estimates that about seven million (*) people are currently under saving for retirement and a major part of the reform is the Government’s ideas for making it easier for these people to save for retirement. The proposals will have wide ranging effects across every field of UK business as the onus will be put on employers to help encourage more people to save.

From October 2012 UK employers will be required to automatically enrol employees into a ‘qualifying workplace pension scheme’. This auto enrolment could be to your existing company pension scheme if it meets certain criteria. If it does not meet the criteria or if you do not operate a company pension scheme then your employees will be enrolled into NEST, a simple, low-cost pension scheme being introduced by the Government.

Between October 2012 and 2017, depending on the size of company, all UK employers will be required to contribute a minimum of 3% of each employee’s eligible earnings into a pension, assuming the employee does not “opt out”. This is intended to incentivise them to start saving towards their retirement. Employees will need to pay a personal contribution of 4% with a further 1% tax relief being added to make the minimum contribution 8%.

The consideration for business is whether to join Nest or have their own bespoke pension scheme which is fit for their purposes.  Either way, employers need to address this situation and have a suitable action plan as to when and how they will comply with the legislation.

(*) Nest pension Advice website June 2011

Source – Beaufort Wealth Management Ltd

Registered Office 5 Clarendon Place, Leamington Spa, CV32 5QL, England. Registered in England and Wales.  Beaufort Wealth Management Ltd is an appointed representative of Financial Limited (http://www.financial.ltd.uk/), which is authorised and regulated by the Financial Services Authority. Registered No. 06268234