A key point to be stressed about pension auto-enrolment is that NEST is just one option available to employers – there is no obligation to sign up to NEST.
While companies have an obligation to automatically enrol their eligible employees into a qualifying workplace pension scheme, there are many options open to employers, including pensions from household names like Scottish Widows, AEGON, Scottish Life and AVIVA and newer offerings from The Peoples Pension, NOW pensions and NEST.
Many employers will already have a qualifying workplace pension scheme – typically an existing Group Personal Pension or Group Stakeholder Pension arrangement. Alternatively some may have a Final Salary or other occupational pension scheme which may meet the auto-enrolment criteria.
For a pension scheme to meet the Government’s requirements it must:
1: Enable employees to be automatically enroled
2: It must have minimum contributions or accrual rate. For the majority of schemes this will be 8 per cent of band earnings, between £5,668 and £41,450, with a minimum of 3 per cent coming from the employer
3: The employees need to be enroled on a ‘no decision’ basis – this means no paperwork or employee input necessary to join the scheme
4: There needs to be a default investment scheme. At TISCO we feel strongly that although it is not a regulatory requirement, it is best practise to have an extremely strong governance process about default fund selection
Companies with existing schemes are still likely to encounter significant changes, both in terms of communication and administration, together with possible increases in costs, as their employees begin to be automatically enroled.
We can advise on the suitability of existing pension schemes including whether it will be fit for purpose once the auto-enrolment legislation commences. If necessary we are happy to recommend and implement an alternative, auto-enrolment ready, pension arrangement.
Please contact us for more information or to arrange a FREE initial consultation with an adviser