The NEST option is specifically designed for employers who do not have or do not wish to set up their own automatic enrolment scheme with a pension provider. The scheme is designed to be:-

Low cost

Specifically aimed at low to medium earners

Micro employers

NEST can be used in conjunction with a provider scheme for example workers who are on probationary periods or a section of low pay workers within the workforce.

National Employment Savings Trust

However the NEST Scheme has a number of restrictions. Firstly there is a general ban on transfers in or out by those who contributed to their pension.

Secondly there is an upper contribution limit of £3,600 per annum. For employers with higher earning employees this is insufficient.

Thirdly there are limited retirement options and it is clear that workers will be more limited in their choice of pension options at the point of retirement. Independent financial advisers are concerned about this but that is outside the scope of this blog as we are not authorised to give financial advice by the Financial Services Authority. However limited retirement options may have a effect on potential recruitments and potential for staff to leave the business to secure a better package elsewhere.

The investment options are again limited with NEST. Again financial advisors particularly independent financial advisors are concerned about this and if that is a concern for you we would strongly advise that you seek the advice of an independent financial advisor as part of your business planning process and planning for the introduction of auto enrolment, employers duties and NEST. If you are a client of ours we have advisors who are used to working with us who can assist you. We work with a wide number of IFA's and are not tied to anyone.

The death in service benefits which could be paid from a NEST pension are potentially structured in a way which is less favourable from an inheritance tax perspective although the final rules have yet to be clarified in both the pensions industry and independent financial advisors who have been drawing this to the attention of the Government and the legislation is not due to be completed for some months yet. For example of Department of Work and Pensions published draft regulations in July 2011 which have yet to be adopted and could be tailored to remedy this and other potential defects.

As an employer what should you do about pensions now? We would suggest the answer is as follows:-

1.  Make provision within your cash flow for the additional costs on payrole of between 1-3 %.
   

2.  Take expert professional advice from a solicitor in relation to the employment elements and in conjunction with an independent financial advisor in relation to the pension elements.
   

3.  Liaise regularly with your advisors on this point until it is introduced because the regulations are changing and whilst the cash flow implications can be ascertained at this stage the other effects will need to be scheduled into your business plan over the coming months and years.
   

Conclusion.

Expert employment law advice from a Solicitor is needed from the issue of pensions and options to reduce the pension costs.

Many of our clients pay a small monthly fee for our HR Helpline service which allows them to seek and obtain legal advice on these issues without extra cost. If you would like a quote for your business please contact us now.

National Employment Savings Trust - Advice

Bennett's Legal employment solicitors are available to discuss your needs on 0844 472 2378 and are based at our Shrewsbury office but offer advice UK wide to clients. We act for employers and employees.

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