By Matthew West
The government’s personal accounts scheme took a step closer to being realised yesterday as the Personal Accounts Delivery Authority (PADA) announced the details of the government’s own pension provision scheme.
The National Employment Savings Trust (NEST) will be a national workplace pension scheme designed specifically for low-to-moderate earners.
The government scheme will be just one of the schemes available for employers to use to fulfil their new duties under the workplace pension reforms, due to come into effect from 2012.
From 2012 employers will be required to auto enrol workers into a pension scheme, which meets certain criteria and make minimum contributions to the scheme.
Employers will have to contribute a minimum of 3 per cent on a band of earnings, although they can contribute more than this. The total minimum contribution for eligible workers must be 8 per cent (or equivalent) of earnings. This is made up of the employer’s contribution, tax relief and the worker’s contribution.
The duties will be staged in from October 2012, with largest employers affected first. To help employers and workers adjust to costs, contributions will be phased in for employers and employees starting at 1 per cent and increasing gradually to the minimum level.
NEST will be run by the NEST Corporation, a not-for-profit trustee corporation, and will have its own website. NEST will launch in low volumes in 2011.
Jeannie Drake, PADA acting chair, said: “The reforms to UK workplace pensions, including NEST, represent a consensus settlement reached across industry, political parties and interest groups. We all have one goal in mind – to make saving for retirement become the norm and to put an end to poverty in old age. The release of the new brand today is another milestone along the way to achieving one of the biggest social reforms of our generation.”
Pensions minister Angela Eagle, said: “This government’s radical reforms to the pensions system will ensure millions of workers on low and moderate incomes are able to save for their retirement in a workplace pension with a new guaranteed minimum contribution from their employer. NEST will play a key role in this and help transform attitudes to saving.”
But the industry bodies have warned more work needs to be done by the government raise awareness among employees as well as employers.
Maggie Craig, acting director general of the Association of British Insurers, said: “We are pleased that the new name has been announced and hope it will strike a chord with the low paid employees it is targeted for. This new branding must now be a springboard for action. We have for some time stressed the need for an extensive national communications campaign to increase awareness and understanding of pension saving. This would ensure that many more individuals can be helped to build a real nest egg for their retirement. There is little time to lose before the scheme is due to start in 2012.”
Meanwhile, earlier this week the Association of Consulting Actuaries warned NEST would have the adverse effect of reducing employer based pension benefit contributions stating 59% of employers it contacted for a recent survey had admitted they were set to review their pension provision before 2012 when NEST is due to begin.
Of these 24% of employers were considering making pension benefit reductions when they have to auto-enrol all employees into a pension scheme in order to mitigate the costs that higher pension membership would bring.
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