The Pensions Minister, Steve Webb, yesterday denied rumours that automatic enrolment into a workplace pension would be delayed and described the National Employment Savings Trust (NEST) as ‘critical’ to plans to encourage millions of people save for their retirement.
Automatic enrolment for employees
From October 2012, employers with over 10,000 workers will have to enrol anyone who earns over £7,474 and is aged 22 or above into a pension scheme. Medium and small employers will come under a similar obligation in the following years, until February 2016 when the rules cover everyone. To facilitate this, the government has sponsored the establishment of a new defined contribution pension scheme called NEST. It is designed to augment existing pension provision.
Despite suggestions that auto-enrolment might be postponed to relieve the burden on industry, the Pensions Minister, Steve Webb, yesterday confirmed the 2012 start date: ‘At a time of economic uncertainty it is entirely legitimate to look again at these things- but I am absolutely committed to the current timetable.’
Mr Webb also confirmed the importance of NEST: ‘Our plans to get people into workplace pensions will mean that millions will be saving for their retirement for the very first time. NEST is critical to our plans, as a low cost and easy to use option that is designed for people who are new to pension saving.’
Early start for 100 firms
At a NEST event, the chief executive, Tim Jones, revealed that around 100 firms had already decided to use the new pension scheme. These include the chemical manufacturer F2 and the engineering company Metal Assemblies, who have begun to enrol people in NEST ahead of the 2012 deadline. Larger firms, including the Gondola Group, which owns Pizza Express, and the hotel chain Travelodge, are also considering using NEST to meet their automatic enrolment requirements.
Under auto-enrolment rules, firms that use a defined contribution scheme will initially contribute a minimum 1% of qualifying earnings (those between £5,035 and £33,540) and each employee will pay a further 1%. The government will contribute 1% in the form of tax relief. Minimum levels will then rise until 2017, when the overall minimum will be 8%, of which 3% must come from the employer. Firms can pay more than this, however, and at least one early adopter of NEST has already committed to paying 5%.
Which? pension expert, Ian Robinson, said: ‘It is good to know that auto-enrolment remains on track and that NEST is prepared for the millions of people who will start saving for a pension next year. Other providers may begin to offer similar low-cost schemes but at the moment it is distinctive for its transparency and ease of access.’