Nest Update (May 2010)
print
print   

 Publications -> Newsletter Articles

As we have highlighted in previous newsletters the Government’s proposed flagship pension scheme, the National Employers Savings Trust (NEST), is due to be launched in 2012 and as each week goes by more information is released by the Personal Accounts Delivery Authority (PADA) on the framework to the scheme.

NEST recently revealed there would be an annual management charge of 0.3% as well as a temporary 2% contribution charge to help the scheme repay government loans. Pensions Minister Angela Eagle revealed that NEST would keep borrowing until 2030. “The period in which the loan to NEST Corporation will be repaid will ultimately depend on a variety of factors, including the final costs of NEST and the size and nature of its membership. We anticipate that the total loan period, including the years in which NEST borrows from government and the subsequent repayments, will last in the region of 20 years,” said Eagle. As the scheme is being rolled out to employers between 2012 and 2016, early members could be paying the fee for up to 18 years.

Ros Altmann has been quoted as saying that NEST will have to borrow at least £1.5 billion from the government by 2020 and has taken figures and projections produced by the Pensions Policy Institute (PPI) to calculate the shortfall between NEST’s costs and income over the next 10 years. Her figures demonstrate why the Department for Work and Pensions opted for the controversial combined charge of 2% initial and 0.3% annual fees for NEST.

In our opinion, this initial charge of 2% makes it even more important that existing pension arrangements are classed as Qualifying Pension Schemes removing the need to auto-enrol employees in NEST.

How Can a Pension Scheme Qualify?

We can now confirm what will determine a Qualifying Pension Scheme when NEST is launched in 2012. If you wish to use your own company pension scheme it will have to meet the following qualifying criteria:

  • It must permit auto-enrolment
  • Employees must be auto-enrolled within 90 days of joining the company
  • It must have a default investment fund
  • It must deliver a minimum accrual rate or minimum contribution

The qualifying criteria are intended to allow you to choose the form of pension provision that best suits your company and ensure you do not lose the ability to offer a good quality pension scheme for your staff.

Contact Cartlidge Morland for a free, no obligation pension scheme audit to see if your current pension scheme meets the minimum requirements, or to identify the financial impact to your business of meeting the qualifying criteria if it does not. 

Alex Reeves
Managing Director - Employee Benefits
Email: employeebenefits@cartlidgemorland.co.uk
Call:    020 7709 5560

Cartlidge Morland is an independent employee benefits consultancy. We provide benefit services to a wide range of partnerships, family companies, PLCs, charities and governmental organisations. We also provide financial advice to private clients, investment management and mortgage broking services

Phone us on 020 7709 5560 or complete the online contact form