Pensions: National Employment Savings Trust
Today's announcements confirm that the new National Employment Savings Trust
(NEST) pension schemes will benefit from the same tax reliefs currently
available to registered employer and personal pension schemes.
Starting from 1 October 2012, employers will be required to auto-enrol their employees in a qualifying pension arrangement and start making contributions to these schemes. The minimum contributions will be phased in starting at 2% of earnings (including 1% from the employer), rising to 8% of earnings (including 3% from the employer) by October 2017.
Employers with existing pension arrangements will be able to either enrol their employees into their existing schemes (assuming they fulfil the minimum requirements) or set up a new NEST scheme. An overall contribution limit of £3,600 per annum is to apply to contributions to NEST schemes.
Who will be affected?
Employers whose employees are between 22 and state pension age and earn above a certain threshold, expected to be in the region of £5,000 per annum.
The legislation is expected to be phased in, affecting the largest employers from 1 October 2012 and the smallest from 2016.
Auto-enrolment is likely to be an effective way of encouraging pension scheme membership amongst employees. Employers not currently offering contributions to pension schemes or those with a low uptake to their employer schemes are likely to experience a significant increase to their employment costs.