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Pension auto-enrolment from 2012 confirmed

NEST is default for those without a company scheme

All employers will be obliged to make contributions into a workplace pension scheme for eligible workers. Staff will be automatically enrolled once their earnings reach the tax threshold (£7,475 in 2011-12). The National Employment Savings Trust (NEST) will be the default scheme where no qualifying alternative exists. 

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Employees facing redundancy have the right to be consulted in advance

Large firms will begin auto-enrolment in autumn 2012. Smaller companies will follow over the next four years. 

Review published 

Auto-enrolment was first proposed by the previous government. Following work by the Personal Accounts Development Authority (PADA), the National Employment Savings Trust was developed as the default scheme for employers who had no qualifying pension scheme to offer their employees. 

A DWP review, Making Automatic Enrolment Work, was published this week. It calls for several significant changes, including a higher earnings threshold and an optional waiting period of up to three months before a worker needs to be automatically enrolled. Esssentially, however, the review supports the introduction of auto-enrolment from 2012 and the underlying role of NEST. It is envisaged that between four and eight million people will start to save into a workplace pension as a result of this development. 

Pensions Minister, Steve Webb said: ‘Our reforms will ensure that millions of people will start to save for their retirement, many for the first time. I welcome the sensible and balanced proposals from the independent review team, which will help ensure automatic enrolment works.  Building on the consensus for pension reform, NEST will play its part as we transform the savings culture in this country.’

Which? response

Responding to the government’s announcement, Which? chief executive, Peter Vicary-Smith, said: ‘It’s great that the National Employment Savings Trust (NEST) is being supported and that all employers will be covered by the pension reforms. Our research found that people wanted a scheme which was run in their best interests.

‘It is important that the introduction of a waiting period does not lead to increased numbers of people opting out of pension savings.’

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