Workplace Pensions

In October 2012 the government amendments to Pension provision become law, this now means there are some significant changes towards the way UK based employees contribute towards their pensions and some stringent legislation and guidance as regards what the Employer needs to provide for them.

This change is called automatic enrolment, which means that the majority of employees will become part of a compulsory pension scheme at work.

Employers will be required to automatically enrol all eligible jobholders into either the National Employers Savings Scheme (NEST) or an alternative ‘qualifying’ workplace pension and to make minimum contributions into it.

At Guardian Wealth Management we believe this change in legislation may have some significant implications on the running of a business and any scheme of this nature needs careful planning and an understanding of what the downstream implications and benefits will be.

So what is NEST?

NEST is basically a workplace pension scheme designed for automatic enrolment. It’s a basic framework, which allows employers no matter how large or small to fulfil a basic pension scheme to run either alongside an existing scheme or on its own.

The NEST Corporation is the trustee body that runs NEST.  It’s a non-departmental public body (NDPB) that operates at arms length from government and is accountable to Parliament through the Department for Work and Pensions (DWP).

Which scheme should Employers use – is NEST right for me?

Employers will be able to choose the pension scheme(s) they want to use provided the scheme(s) meet certain quality criteria – which may be based on contributions or benefits people receive.

Deciding on the best possible pension scheme should also take into factors such as cost, attitude to risk, the levels of control and time constraints surrounding the management of the pension funds or simply the levels of communication and reporting needed to administer or meet the legal requirements.

There are two main types of pension scheme, a defined benefit scheme where you are promised a set level of pension upon retirement or a money purchase scheme where a pot of money is built up and used to purchase a pension on retirement.

A word of warning there are many options available today which can be confusing, with a number of pension providers offering ‘generic solutions’ that may not fit your business or may have disastrous downstream impacts on the Employer or Employee.

So its important that you take professional advice from people who have been in the industry for a while, who are authorised to give financial advice and also offer impartial independent advice.

When should you start to think about automatic enrolment?

Depending on the size of your business will dictate when you are due to join the scheme, month by month more employers will join and by February 2018 all employers should be signed up.

NEST may not be right for every business which is why we strongly advise you start to map out and understand what this means to your business and what the implications and commitments are likely to be for you and your employees going forward.

As an employer you should ensure that a review of existing arrangements should be undertaken and new arrangements put in place sooner rather than later as the Pensions Regulator can fine companies a daily rate (based on the number of employees) if they do not take action before their notified enrolment date.

We have put together a simple free guide to walk through the options available and highly recommend you take a look before implementing any company wide scheme or delay the implementation until the last minute.

Alternatively please contact one of our Independent Financial Planners for further information regarding which pension scheme is best for your business and how to ensure you meet the minimum legislation requirements.

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