NEST Pensions reform 2012

20th December 2010


The introduction of the National Employment Savings Trust (NEST) has been in the press recently following a government review of the scheme. The headlines that employers will have to start making pension contributions for all of their employees from 2012 are somewhat misleading as the majority of employers will not need to comply with the rules from that date. The start date for the roll out of the scheme is October 2012 but this will impact on employers with 120,000 employees or more. For those with a more modest workforce the start date varies, for example those with less than 500 employees the date is 1 January 2014 and for those with less than 50 employees the earliest start date is 1 August 2014.

According to the website

‘The requirement to be NEST compliant starts from October 2012 and will vary dependent on size of business and PAYE reference number. The Regulator will write to all employers around 12 months before their staging date so that they know when to automatically enrol their eligible jobholders. Three months before the employer’s staging date the Regulator will write again to remind them of the new duties and the need to register.’

Employees eligible for automatic enrolment will be:

The qualifying scheme may be the existing employer pension scheme if it meets certain conditions, or if an employer does not have a qualifying scheme they will have to set one up or use a NEST pension scheme.

Minimum contributions levels for qualifying schemes

¦  Minimum Contribution  ¦  Employee Pays  ¦  Tax Relief  ¦  Employer Pays   ¦

¦               8%                 ¦            4%          ¦         1%     ¦          3%          ¦

Employees will be able to opt out of the scheme if they so wish. However for those employees within the scheme it is expected that the employer will have to contribute at least 3% of their ‘qualifying’ earnings. These earnings are their basic salary plus commissions, bonuses and overtime between £7,475 and £33,540 a year (2006/07 terms).

Contribution levels will be phased in over a period of time


¦   Employee Pays **  ¦  Employer Pays    ¦

Before October 2016                   ¦           1%                ¦            1%           ¦

October 2016 – October 2017     ¦            3%               ¦             3%          ¦

From October 2017                    ¦            5%                ¦            3%           ¦

** Less tax relief.

If you would like more details of the scheme please do get in touch.

Internet links: NEST pensions website  NEST pensions dates for employers

Posted – 20/12/2010