Nest and Auto EnrolmentHow will it impact your business?Chris Daems Dip PFSPrincipal Financial Solutions
What is NEST and when is it going to happen? • Nest is the new government established state pension scheme. Most employers and employees will need to contribute and will be “Auto Enrolled”. • It impacts most employees (if they earn over £7,475) and all • employers. • The minimum timescale for employment is 13 weeks • The liability and responsibilities rests solely with the employer • The pension scheme will start to impact employers and employees from 2012 • Contributions into the scheme will be 8% between £5715 - £38,185 with at least 3% must be from the employer. • Employers can choose to make their own provision or take the NEST scheme
New pension rules – Who will it impact? • The new rules impact every business who employs PAYE • individuals including:- • Private companies • Charities • Companies with existing schemes who do not meet new contribution levels. • It will not impact:- • - Businesses who already have a scheme which meets the minimum level of contributions (3% for employer and 4% for employee). • - Sole Traders who do not employ.
Is NEST going to happen? Really? • NEST has already been established in Law in the Pensions Act 2008. • Consumer Spending Review and the Latest budget confirmed that the new pension rules will continue to apply • Longer Term it makes fiscal sense for the government – takes the responsibility away from the State scheme and gives the responsibility to the Employer and Employee to manage. • Therefore it’s going to happen.....and employers need to be aware, plan and prepare for these rules. • Be aware of the IR35 rules – employed or self employed?
NEST – have I got a choice? • NEST is the “default” option:- • Designed for low earners • Will have a limited fund choice – all low risk • Can’t transfer funds in our out • No access to advice • However, employers can decide to set up their • own scheme:- • Access to advice for Employers and Employees • A wider range of fund options for employees • A choice of providers – the whole of the market is available • The opportunity to transfer funds from one scheme to another • A more comprehensive service from both Adviser and Provider • An employer setting up their own scheme will “opt out” of NEST
NEST – Timescales • The larger companies are being dealt with first. • Then moving down through dependent on business size. • You can find out when you and your clients businesses specifically be impacted by looking at the businesses PAYE ref number – available on request. • Employees can “opt out” but will be “opted in” every 3 years and on joining a new employer. Also, employers cannot influence or persuade employees to do so. If this is found, heavy legal penalties (fines and/or imprisonment) will apply. • For small employers (under 50 people) these fines will be up to £500 per day. • Under the NEST scheme the responsibility for administration will be with the Employer.
Why Take Advice Now • Allows contributions to be planned for as part of the business as well as utilising future pay rises to allow for this budget. • Changes in the IFA world mean that that after 2012 the advice population with more businesses looking to get ready for the NEST rules. • If you leave it too long, the may not be sufficient time to organise an alternative scheme and therefore the business will be forced to go down the NEST route. • By planning for the changes now, it provides an opportunity to package the changes as a benefit for your employees. However if they are “forced” to do it in a couple of years time, the employee perception is different.
Thanks for listening • Any Questions? • Mr Chris DaemsDip PFS. • Principal Financial Solutions, • 51 Moorgate, • London, • EC2R 6PB. • Contact Details • Mobile : 07792 790 058 • Office : 08450 568 959 • Email : Chris@Principalifas.co.uk