NEST will be the biggest change in employer pension provision in decades, and will potentially increase employer contributions and administration costs, at a time where few businesses can afford to do so.
From October 2012 NEST (National Employment Savings Trust) was formed and employers have an obligation to either join the NEST scheme or have a compliant Group Pension plan in place.
Either way, both employers and employees will have to contribute to the pension with a minimum contribution of 3% from the employer and 5% from the employee, over a three year period.
Within the NEST scheme employees will be automatically enrolled into a default fund with a limited number of alternative funds to choose from. Many investment professionals consider there to be little chance of obtaining decent returns on investments with such restrictions however these funds are going to be cheaper to run than standard pension funds.
There will be extra paperwork with NEST, additional employer responsibilities and regulatory requirements. NEST could mean that employers need additional resourcing which increases the cost to the business and the time involved in processing this.
For those employers who already have a Group Pension Schemes it is essential to have it reviewed to ensure that it meets with the standards as laid down in law.