are you ready for nest?
DESCRIPTION
Guide to the new workplace pension reformsTRANSCRIPT
Are You
Ready for
NEST?
Preparing for new
workplace pension
scheme reforms
2011
THE REASONS BEHIND THE REFORM
Work-based pensions are being reformed to encourage
more people to save for their retirement.
As a Nation, the statistics show that many people are failing
to save for retirement.
We are healthier, living longer and expect more from our
retirement.
The Government has determined that more people need to
save for their retirement to supplement the Basic State
Pension through either their Company pension scheme or
a new Government Pension scheme called NEST (National
Employment Savings Trust).
This means that all employers will have to automatically
enrol all eligible job holders into a qualifying pension
scheme or NEST and make an employer contribution.
PREPARING FOR NEST
For some employers, auto-enrolment is less than a year
away, but many employers have not yet considered how
they will be affected by the reforms and even fewer have
started to put procedures in place to make sure they
comply with the rules.
To ensure a smooth transition and optimum compliance,
employers need to engage well in advance of their
mandatory start date.
According to research by JLT, very few employers plan to
use NEST instead preferring to use an existing scheme or
set up a new scheme. However, many are still unsure as to
their approach towards auto-enrolling employees and the
administration burden this will place on them.
Worryingly, some two thirds of employers have not yet
quantified the additional costs of fulfilling their
responsibilities and, in terms of direct contribution costs
and administrative expenses, these could be substantial.
ALL EMPLOYERS WILL
BE AFFECTED BY THE
REFORMS
What will you need to do?
The main things employers
will need to do:
Provide a qualifying scheme for your workers
Automatically enrol all
eligible jobholders into the scheme
Pay employer
contributions for eligible
jobholders to the scheme
Tell all eligible jobholders
that: – they have been
automatically enrolled
and – they have the right to opt out if they want
Register with the pension
regulator and give them
details of your qualifying
scheme and the number
of people that you have automatically enrolled.
Who has to be enrolled?
Employees, aged between 22 and 65, who work in the UK and have (in 2011/12 terms)
earnings of at least £7,475 per annum (i.e. the same as the personal allowance for
income tax).
Other employees can ask to be enrolled and all employees have the right to opt-out.
The auto-enrolment process must be repeated every three years for those that opt-out,
but employers are to be given flexibility around the date they re-enrol employees by
allowing a six month window for this activity.
Employers can auto-enrol into an existing pension scheme, set up a new scheme, use
NEST or comply through a combination approach.
What will it cost?
Employer and employee contributions are based on ‘qualifying
earnings’ between, in 2010/11 terms, £5,715 (the National Insurance
primary threshold) and £38,185 (inclusive of bonuses, commission,
etc).
These figures will be increased each year in line with earnings. Total
contributions start at 2% from 2012 (1% employer and 1% employee,
inclusive of basic rate tax relief) and will reach 8% by 2017 (3%
employer and 5% employee).
When will the changes come into effect?
Each employer will be given a date from which the changes will have to be in place. This is known as your staging date.
The first staging dates will begin 2012 and will continue through to 2016.
Your staging date will be broadly based on the number of people you have in
your PAYE scheme.
Employers with the largest number of workers will have the earliest staging dates. The smallest employers will have later staging dates.
You can, of course, set up pension arrangements for your workers at any time. You don’t have to wait until automatic enrolment is introduced in 2012.
Even if you already provide a pension scheme for your workers, you will need to check if it is a
qualifying scheme.
It will need to meet certain requirements depending on the type of scheme you have. It must also be
appropriate for automatic enrolment. We can review your existing scheme and discuss the rules and any possible changes.
Many occupational and group personal pension schemes will qualify. To be a qualifying scheme, it
needs to meet certain requirements.
To be a qualifying scheme, minimum contributions must be made or it must provide a minimum rate
at which benefits will build up. Even if it doesn’t qualify at the moment, you may be able to change
the scheme rules or amend the terms of the policy so that you will be able to use it by the time your staging date comes around.
If you do not have an existing scheme, we can set up a qualifying scheme that meets all requirements
If you would like more information on any aspect of NEST and auto-enrolment, or if
you would like to discuss a review of your present pension arrangements, then please
do not hesitate to us:
BY EMAIL: [email protected]
BY PHONE: 01642 661600 (Teesside Office) 01670 789070 (Northumberland Office)
www.wrfinancial.co.uk
WR Financial Management Limited are authorised and regulated by the Financial Services Authority
Registered in England - 2136861
HOW WILL I KNOW IF MY SCHEME IS A QUALIFYING SCHEME?
HAVE AN EXISTING PENSION SCHEME?
WHAT IF I HAVE AN EXISTING PENSION SCHEME?
HAVE AN EXISTING PENSION SCHEME?
WHAT IF I DO NOT HAVE AN EXISTING SCHEME?
HAVE AN EXISTING PENSION SCHEME?