Employers expected to opt for Nest pension scheme

| November 7, 2012 | 0 Comments
Employers expected to opt for Nest pension scheme

Many small employers are expected to opt for the government’s National Employment Savings Trust (NEST) when they join the auto-enrolment scheme, according to Chris Atkin, director for Atkin & Co.

The government launched automatic enrolment on 1 October 2012 for the largest companies, and smaller firms will be drawn into the scheme as it is rolled out over the next five years.

Employers are required to automatically enrol workers aged 22 or over, and earning more than £8,105 a year, in a qualifying pension scheme unless they are already in one or they choose to opt out.

As part of its pension reforms, NEST, a simple, low-cost pension scheme was introduced.

Mr Atkin suggests that many small employers will leave their auto-enrolment arrangements to the last minute and will choose NEST as the safest and cheapest option.

He said: “Many smaller companies may not have the time, inclination or resources to carry out proper due diligence on all the different auto-enrolment options.

“Without a proper process such employers will be at risk if things go wrong and we may therefore see a flight to Nest as the safest option. It’s likely to become a bigger player.

“We may also see small employers selecting Nest to avoid potential mis-selling scandals and legal battles.”

NEST includes a cap on annual contribution limits and there are also transfer restrictions in place.

The Work and Pensions Select Committee recently recommended that these statutory requirements should be removed as they could present a barrier to employers wanting to use NEST and might prevent the scheme offering value for money to employees.

In response to the concerns, the Department for Work and Pensions has issued a call for evidence on the impact of the restrictions.

NEST is designed to suit low to moderate earners, smaller employers and firms with a high turnover of staff who could struggle to find a suitable product in the existing market.

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