The Government has confirmed that it is pressing ahead with the National Employment Savings Trust (Nest) the new low-cost pension scheme for workers on low to middle incomes.
Under the regime, beginning in 2012, employers will have to enrol staff aged over 22 into a scheme of minimum standards. Workers will have to actively opt out to avoid having earnings deducted. There has been no reprieve for the smallest businesses (< 5 staff), which had lobbied to be excluded from the pensions reform.
The earnings threshold at which employees are automatically enrolled is to be raised from the National Insurance earnings threshold of £5,035 to the income tax threshold of £7,475.
An optional period will be introduced so that employers can delay by up to three months before automatically enrolling a recruit.
From October 2012 to October 2016 the minimum employer’s contribution for money purchase schemes will be 1 per cent of salary above the national insurance earnings threshold (currently £5,715). This will rise to 2 per cent for the following year and to 3 per cent from October 2017.
Employee contributions will partly depend on the generosity of the employer. The minimum requirement is for the total contribution, from employer and employee combined, to be 2 per cent from 2012 to 2016, with at least 1 per cent coming from the employer.
The combined contribution for the following year must be 5 per cent, of which at least 2 per cent has to come from the employer. From October 2017 the minimum rises to 8 per cent, of which 3 per cent must be from the employer.
Source – The Times
