Pensions law is changing and auto-enrolment is almost upon us.
This industry forum is supplied by Nest.
With the major changes happening to workplace pensions from October, it is important that employers of all sizes start thinking about their own arrangements as soon as possible, because it can take up to 18 months to prepare.
They will need to consider everything from organising data and systems to how they will inform their workforce and managing the opt-out process.
They will need to consider how suitable a particular scheme is for workers who are new to pensions, for example its investment strategy, ease of use and communications. An employer should also consider how any new or existing scheme would cope with potentially large numbers of joiners and leavers.
Nest, the National Employment Savings Trust, is a low-cost and easy-to-use pension scheme that is available for any employer to use to meet their new duties. Employers can use Nest in a number of different ways. It can be used as a sole scheme for all the workers in an organisation, or alongside another scheme already in use.
Nest levies a 0.3% annual management charge (AMC) on members’ total funds, plus a charge on contributions of 1.8%. For many members, our charges work out as broadly equivalent to a 0.5% AMC across their time saving with us. An AMC of 0.5% is a good benchmark for the kind of low charges currently enjoyed by members of large workplace schemes.
Nest members have one retirement pot for life. They can keep contributing to it whether they change jobs, stop working or become self-employed. For employers, this means no ongoing administration when Nest members leave their employment. If a worker who is already a member of Nest joins an organisation, the employer can just contribute to their existing Nest retirement pot.
The right to opt out of a pension is fundamental to automatic enrolment, and employers need to consider how their provider will help manage this process.
Workers have the right to opt out within one month of being automatically enrolled. If a member opts out during the opt-out period, they will get back any contributions they have made and the employer will get back any employer contributions. After the end of the opt-out period, a Nest member can stop saving at any time, but without a refund on contributions.
The legislation means that employers need to be careful not to encourage or induce workers to opt out. Nest gives members the option to opt out electronically as well as by paper via their employer. With electronic opt-out, Nest will act as the employer’s agent in the opt-out process, easing the amount of administration required and notifying them automatically if a member has opted out.
Nest members can opt out online, by telephone or by post. Our opt-out process has been designed to be as straightforward as possible. It will support members, with information, in making a decision to opt out or stay opted in. For example, we will make it clear what the member could lose by opting out, for example their employer’s contribution and tax relief.
To find out more about where Nest fits in with preparing for October 2012 and beyond, click here or call 0300 303 1949.
Helen Dean is managing director, scheme development, at the National Employment Savings Trust (Nest)
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