A summary of the latest proposals is available in PDF format here.

NEST rules and regulations are still subject to change but a summary of the latest proposals, as published on 27/10/10 and update on the 25/01/12 is provided below. Pensions Reform applies to every business with at least one employee. Employers can use their own schemes (in accordance with the guidelines) or adopt the central National Employment Savings Trust (NEST).

Employer Responsibilities – All employers must participate unless exempt

• All employees aged between 22 and pension age, with relevant earning’s, must be enrolled to a qualifying pension scheme at outset and every 3 years thereafter (if they had elected to opt-out at any subsequent point).
• Employer contributes 3% of relevant earnings (see ‘Phased Launch’ below).
• Younger employees can join on request & receive an employer contribution.
• The salary threshold from which employees must be auto-enrolled is the same as the income tax threshold, currently £7,475 (and revised every year). Relevant earnings are £7,475 – £39,853 in 2012, but contributions should be based on earnings in excess of the prevailing National Insurance threshold (currently £5,564pa).
• Employer can base its pension scheme contribution on higher levels of remuneration subject to a total individual contribution limit of £4,300 pa (this limit applies to NEST only, not private schemes)
• Employer and/or employee can choose to pay higher contributions than the statutory minimums subject to the limit of £4,300 pa (this limit applies to NEST only, not private schemes).
• Salary sacrifice is permitted.
• Partners of staff can be enrolled into the scheme.

5 Year Phased Launch (formerly 18 months and 4 years)

• Phase 1 due to start October 2012 for the largest employers (120,000+ employees).
• Employers have been placed into 25-30 ’size-based groups’ with each group assigned a formal start date between October 2012 – April 2017 (EBS can provide further details).
• Initial contribution levels 1% employer, 1% employee (of which 0.2% is tax-relief)
• This level of contribution can be maintained for up to 5 years (until September 2017).

• Increasing to 2% employer, 3% employee (of which 0.6% is tax-relief) until September 2018.
• Finally reaching 3% employer, 5% employee (of which 1% is tax-relief) by October 2018 for all schemes.
• No transfers in or out of the NEST scheme will be permitted until 2017 at the earliest, apart from retirements. At this time the £4,300 contribution limit placed on NEST will also be reviewed.

Auto-enrolment

• All relevant staff must be auto-enrolled within 90 days and every 3 years thereafter. This has been increased from 30 days.
• Employer must deduct contributions immediately.
• Employee has 30 days to opt-out.
• Opting-out not to be encouraged or made too simple.

Exemptions from NEST for Existing Schemes

• Current scheme must offer auto-enrolment within 90 days & every three years thereafter
• Scheme must offer a default investment fund
• Minimum employer/employee contributions must match NEST requirements as follows:
  • Minimum 9% of pensionable pay (4% employer minimum)
  • Minimum 8% of pensionable pay (3% employer minimum) provided pensionable pay is at least 85% of total pay
  • A minimum of 7% of pensionable pay (3% employer minimum) provided total pay is pensionable

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