An NEST pension is not at all obligatory and you should always remember this.
Any eligible employee must be auto-enrolled into a scheme by the company because that is what the law requires. However, it doesn’t have to be a NEST scheme.
Schemes like Group Stakeholder Pensions and Group Personal Pensions with Final Salary could make you eligible for auto-enrolment.
For a scheme to meet the necessary requirements for NEST or auto-enrolment it must:
- Allow employees to be automatically enrolled
- Have minimal contributions or the minimum accrual rate. The minimum for most schemes will be 8% of band earnings (between £5,415 and £37,845) and a minimum of 3% must be contributed by an employer.
- Provide a policy of ‘no-decision’. In other words, an employee does not need to fill out paperwork at all to join a pension scheme.
- Have a default scheme of investment. We strongly urge this point even though it is not required of you. However, it is beneficial for a strong governance process with default fund selection to be in place.
You may encounter some major changes if you already have an existing scheme. Costs will likely increase for both parties employees without a pension scheme will be automatically enrolled.
If you are without an existing pension scheme then the changed may be even more noticeable.
The strategy pack that we offer covers everything to do with NEST and auto-enrolling so that everything is clear for you. Register now and we’ll email you a free copy over right away.
New NEST Compliance Requirement
It doesn’t matter which scheme you choose, the employer will always have to keep up to date with the new requirements.
The requirements are regular and they secure the rights of all employees. This ensures that the employees who don’t comply aren’t getting a competitive advantage. To deal with this, certain requirements are put in place.
1. Auto-enrolment: Registering with The Pensions Regulator is a requirement as your employer PAYE scheme duties need to be discussed and planned. HMRC can find out if you’re not registered by comparing your records.
2. Opt-out process: Your statutory employment rights will not include the dismissal of employees for any reasons related to pensions. These rights put restrictions on agreements that limit your employees’ rights and your duties.
3. Communications: You as an employer will need to communicate regularly with employees and inform them of any updates. They will need to know when they are being enrolled and how they can opt-out. Employers cannot provide opt-out forms as they are distributed by your affiliated pension company.
4. Pension Payments: The administrator or trustees of your pension scheme will monitor the payments you make and any failures will be reported to The Pensions Regulator.
What this means for UK employers.
Two costs will potentially be added to your finances along with the additional costs of contribution rises and increases in membership.
- Administrative costs will be first, which include registering and conforming to your new enrolment duties. There are in-depth rules being developed to help you to understand what you need to cover with employees and the regulator, as well as a detailed process for the enrolment of staff and opt-outs.
- The regulator will be the second cost, as they are able to issue fines should an employer choose not to comply.
The NEST strategy pack is the perfect guide to see you through this change. Register for one now, it will be emailed over free of charge.
Pension auto-enrolment staged introduction dates
There will be obligtions for auto-enrolment but some employees will be required to auto-enrol at different times to others. October 2012 saw some of the larger companies begin to enrol and all other companies in the UK are required to start doing so by April 2017. Depending on the size of your business, you will have a different ‘staging date’.
These dates are decided by HMRC as they calculate the size of companies.