3.8.10 - PREPARING FOR 2012 - NEST

In the UK, we are now living longer and having fewer children. This has resulted in workplace pension schemes coming under increasing pressure to provide the income of retirees for longer with less investment. At the same time, individuals are not saving enough for their retirement. This has prompted concern within the Government over its ability to cope with the future demands for state payouts.

In an effort to address these issues, they have decided to introduce the National Employment Savings Trust (NEST) in 2012. This scheme is designed to encourage greater savings for old age, whilst opening up access to savings for individuals who do not currently have a decent workplace pension scheme. From 2012, all eligible employees will be automatically enrolled into NEST unless a suitable workplace pension scheme exists to take its place.

For employers, this creates a number of issues as such schemes must be part funded by the employer, in addition to an employee's contribution which will be entitled to tax relief.  The cost of having to part fund and administer such schemes is likely to increase costs for virtually all businesses.

There is also the question of whether to continue with, or set up, a workplace pension scheme instead – which will offer employers and employees greater flexibility.

Whatever your situation, it makes sense to ensure your own needs and those of your workforce, where appropriate, will be met. The sooner you begin to consider your options, the better prepared you will be for the changes you and your business may need to make.