1. National Employment Savings Trust
(NEST)
What your corporate clients need to know
Background
People are living longer. This means people can enjoy more time in retirement and need to
plan and save for their later years.
The Government estimates that around seven million people are not saving enough to meet
their retirement aspirations. Therefore the Government is making changes to the pension
system which, as an employer, will affect you too.
What do the changes mean for employers?
From 2012, employers will be required to automatically enrol all eligible jobholders into
either the National Employers Savings Scheme (NEST) or an alternative ‘qualifying’
workplace pension and to make minimum contributions into it.
The process will be staged, dependent on employee head count, from 1st October 2012 to 1st
September 2016, with large employers being the first to have to take action.
Who will need to be automatically enrolled?
All jobholders working in Great Britain aged at least 22 years old who have not yet reached
State Pension age and are earning more than £7,475* a year (the income tax threshold at
2011) will need to be automatically enrolled into either an employer’s workplace pension or
NEST.
*2012 figure to be confirmed.
What is the minimum contribution employers must pay?
Under NEST, employers will need to contribute 3% of band earnings for eligible jobholders –
those earnings between £5,715 and £38,185 (applicable in 2011/12).
This will be supplemented by the jobholder’s own contribution (4%) and 1% in the form of
tax relief. Overall contributions will total at least 8% for this type of scheme.
NEST will carry an annual management charge of 0.3% per annum and an immediate 1.8%
charge on initial contributions to cover initial costs.
Who can opt in?

2. Jobholders aged between 16 and 22, and between State Pension age and 75 who are
earning more than the above figure, will be able to opt in to their employer’s workplace
pension and will qualify for the compulsory minimum employer contributions. Those earning
below the above figure may opt in to their employer’s workplace pension. Their employer
will not be required to make a contribution, but may do so if they wish.
Which scheme can employers use?
Employers will be able to choose the pension scheme(s) they want to use provided the
scheme(s) meet certain quality criteria (including any current scheme). These may be based
on contributions or benefits people receive. Therefore it is important for employers to seek
independent advice prior to when the changes commence.
Many employers who already offer a Group Personal Pension (GPP) scheme may feel that the
pensions reform taking place will not affect them. Unfortunately, if any employees are not
members of the scheme or the contribution levels by both the employer and the employee
are not in line with the ‘qualifying’ standards, organisations could find their employees
automatically enrolled with the new NEST scheme.
When do the changes start?
The changes are planned to start from 2012. The plan is to stage in automatic enrolment
over a period of time, starting with large employers, medium and then small.
To help employers adjust gradually, the plan is to phase in the employer contribution levels
– starting at 1% and then moving to 2% and finally 3%. The jobholders’ contributions will
also be phased in the same period.
How will I know what to do in the future?
DWP, The Pensions Regulator (TPR) will be writing individually to all employers at around 12
months and again at 3 months in advance of their automatic enrolment start date, to inform
you when you need to take action and what you need to do to comply.
What should your corporate clients be doing now?
• Ensure they have a full understanding of the basic NEST information, as well as the
advantages and disadvantages of the NEST Scheme for themselves and their
employees.
• Take independent financial advice to review their existing pension arrangement
sooner rather than later to ensure they have a full understanding of the various
options available to them, the timescale and the costs.
• Decide if they are going to set up their own ‘Qualifying’ Group Personal Pension (GPP)
Scheme (or amend any current provisions) and phase this in or enter the NEST
Scheme when the time comes.

3. Note: A review is important, as The Pensions Regulator, who will oversee the
implementation process, does carry the power to levy fines of up to £50,000 on employers
who do not take action.
For further information on the NEST Scheme and a full and tailored, free ‘no obligation’
review for your clients as to where they sit currently within the proposed workplace pensions
reform regulations, please do not hesitate to contact Simon Clews, Chartered Financial
Planner, on 01923 853 774 or email sc@dgsifa.com.
www.dgsifa.com
DGS IFA Ltd is authorised and regulated by the Financial Services Authority.