PENSIONS

National Employment Savings Trust (NEST)

Planning and preparing for the future you want

National Employment Savings Trust (NEST)

The National Employment Savings Trust (NEST) is a defined contribution workplace pension scheme set up by the UK government to support auto-enrolment. As a ‘qualifying’ scheme, it can be used by any UK employer to meet their responsibilities. Many employers prefer to auto-enrol their employees into NEST rather than establishing their own pension scheme.

Other defined contribution pensions can be transferred by members into a NEST account. Funds may also be transferred to another registered scheme once NEST contributions have stopped.

While auto-enrolment is a legal obligation for employers, using NEST is optional. It is designed as a straightforward scheme with limited features, allowing employers with more complex needs to set up other workplace or occupational pensions.

Key considerations for employers:

1. Which type of scheme are you offering your staff?

It is essential to compare the benefits and drawbacks of alternative employer pension schemes with NEST. This review will assist you in determining the most suitable option for your organisation. For some companies, combining two schemes might be the best approach. For example, you could enrol senior staff into a separate occupational scheme while using NEST for other employees.

2. Focus on your budgets

Employers must contribute at least 3% of an employee’s ‘qualifying earnings’ into their pension, which will significantly impact business costs. If you choose a higher contribution rate, you need to plan for the long-term financial implications of enrolling all staff accordingly. Consider whether contributions will be calculated based on the full salary or just the band earnings. Planning for these costs from the outset is vital to avoid a sudden financial burden.

3. Review your existing systems to ensure they can handle the extra administration

Assess whether your current payroll and HR systems can manage the additional administrative workload. This is particularly important for organisations that opt to operate both an occupational pension scheme and enrol some staff into NEST, as this dual approach can increase complexity in your processes.

4. Communicate these changes effectively to your staff

Think about how you will communicate these pension changes. Engaging employees with their pension helps them recognise its value as a vital part of their benefits package. A good pension scheme can add significant perceived value and demonstrate that your organisation is committed to its workforce. Offering a scheme with benefits above the government standard can also make your organisation more attractive to both new and existing employees. Employers providing contribution rates above the statutory minimum may consider applying for a pension quality mark to set their scheme apart.

Employers which offer schemes with contribution rates above the statutory minimum may be interested in applying for a pension quality mark to differentiate their scheme from others. (www.pensionqualitymark.org.uk)

Please contact us for further information and advice.

NEST IS REGULATED BY THE PENSIONS REGULATOR.