NEST is a UK government-set up defined contribution workplace pension scheme created to support auto enrolment. It is a qualifying scheme that any UK employer can use instead of setting up their own pension plan. Employees can transfer other defined contribution pensions into NEST and may transfer out once they stop contributing. While auto enrolment is compulsory, joining NEST itself is not. NEST is designed to be simple, and employers needing more advanced features can choose other workplace pension options.
Look at the advantages and disadvantages of other employer pension schemes when compared with the NEST scheme. Once you have analysed this, you can then decide which is more suitable for your organisation. A combination of two schemes may be the most appropriate approach initially, with staff eligibility for different schemes contributing to the solution. For example, senior and employed staff being enrolled into an occupational scheme and contract staff being enrolled in NEST.
Employers have to contribute 3% of every employee’s ‘qualifying earnings’ to their occupational pension scheme, which will have a considerable impact on the costs of the business. If you offer a higher contribution rate, plan for the cost and long-term implications of enrolling all staff on this basis. Look at whether you are making contributions on the full salary amount or band earnings. The key is to budget for these newly introduced measures, so that larger pension contributions do not make a sudden impact on costs. Employers may consider reviewing their total remuneration package in order to absorb these extra costs.
Can your payroll and HR systems cope with any extra administration? This is particularly relevant for any organisations that run both an occupational pension scheme and enrol some staff into the NEST system.
Communicating pension changes clearly is essential to engage employees and encourage them to value your scheme. A strong pension offering is often seen as a key part of an employee benefits package and can significantly enhance the perceived value of your organisation. Employers who offer contributions above the statutory minimum are more attractive to current and prospective staff and show a clear commitment to their workforce. They may also consider applying for a Pension Quality Mark to further distinguish their scheme.
Please contact us for further information and advice.
NEST IS REGULATED BY THE PENSIONS REGULATOR.
