This article relates to the forthcoming introduction of the National Employment Savings Trust (NEST) which comes into force in October 2012.

1. NEST (National Employment Savings Trust)
Countdown to Launch (October 2012)
This article relates to the forthcoming introduction of the National Employment Savings Trust (NEST)
which comes into force in October 2012. It highlights a number of the key issues, which will affect all
employers over the next six years, whilst NEST is integrated into the UK pension system.
Employers will be receiving written guidance from the regulators as to their responsibilities and, of
course, how the new system will operate. This guidance, which is available online, covers the extent of
the employer’s duties across 9 individual guides.
Furthermore the Financial Services Authority (FSA), which has overall jurisdiction, has also finalised its
rules covering such topics as automatic enrolment and employers offering alternative schemes, such as
GPP’s.
Three main groups of workers are affected by In a Defined Contribution (Money Purchase) arrangement,
NEST be they full-time employees or contract the minimum contribution is 8% of qualifying earnings, with at
least 3% paid by the employer.
workers.
At the present time it is based on 2010/11 tax year (qualifying
Eligible Job Holders: Must be automatically enrolled earnings are between £5,715 and £38,185). This includes all
between the age of 22 and State Pension age. They will sources such as overtime, bonuses and commissions.
earn over a threshold, which at this stage is likely to be the
income tax personal allowance - £7,475 in the tax year For those companies who operate pension schemes on
2011/12. However, the Government has indicated that it basic salary only, they must meet one of the 3 basic
wishes to increase this to £10,000 per annum. This affects
requirements.
all workers working in the UK regardless of their nationality,
the location of the employer company or the length of their
 9% of pensionable earnings/at least 4% payable by
stay in the UK.
the employer contribution
Non-Eligible Job Holders: Have the right to opt into the
 8% of pensionable earnings/at least 3% payable by
Pension Scheme with the same basic rules as eligible job
holders. They are under age 22 or over State Pension age, the employer (pensionable earnings at least 85% of
but under 75 years. Similarly they may be earning under the total pay for all members).
current threshold.
 7% of pensionable earnings/3% employer (all pay
Entitled Workers: This final group are very low earners (less must be pensionable)
than the NIC primary threshold) who are also not job holders.
Although they have the right to ask the employer to make Although this does complicate matters this will permit more
pension arrangements for them, the employer will not have employer pension schemes to qualify under NEST
to contribute. regulations.
Self-employed sole employee directors and non-executive
directors are beyond the scope of automatic enrolment.
Employers can defer automatic enrolment for up to three
months of the employee starting service.

2. ‘Chartwell’s review, implementation and
management service is of great help to employers
trying to navigate through this complex
legislation’.
Although the choice is unlikely to be quite as wide ranging Last but no means least, the pensions regulator has now
as those offered by Group Personal Pension Schemes, issued a document (Guide No.2) which details the
there has been a recent introduction of so called ‘Lifestyling responsibility of the employer, in respect of auto enrolment,
Funds’, which permit a gradual reduction in high risk funds implementation and management on behalf of the
as the pension member moves towards retirement age in membership.
order to reduce volatility and potential capital erosion of
funds as they reach retirement. This details several key areas below, which I will not cover in
this article, but would be happy to discuss:
The default NEST options are referred to as ‘Target Date
Funds’, where risk is governed by the individual’s proximity to  Initial assessment of eligible groups
retirement. This is in 3 phases as follows:
 Selecting a NEST compatible scheme and contribution
Foundation Phase: For 5 years, on members joining from level
age 22, they adopt a generally low risk position, so as not to
discourage the member from continuing with membership of  Announcement and roll out to members
the NEST pension
 Establishing and management of a suitable
Growth Phase: Aiming to offer returns of 3% plus inflation for payroll/collection system
most of the term of membership
 Dealing with new members and opt out instructions
Consolidation Phase: Approximately 10 years from
retirement, with a gradual move to lower risk funds, to reduce  Reviewing scheme suitability on a regular basis
the possibility of capital erosion
It is quite clear that this simple initial concept may be
incredibly burdensome to many employers, particularly those
Both Ethical and Sharia, as well as lower growth & higher who do not operate pension schemes at the present time.
risk funds, will also be available. It is likely that these options
will satisfy the majority of NEST members. Unlike Stakeholder in 2001, this is a compulsory pension
scheme and both the Government and Pension Regulator
made clear that they will not tolerate any employer non-
compliance.
If you have any questions about anything Important note
you have read, please contact The information in this bulletin is based on our understanding of tax law
and practice at the date of publication, which may be affected by future
changes and individual circumstances. It is issued as general information
Jon Fisher/Richard Clarke and is not intended to be advice to any specific person named or
Chartwell Financial Services Limited otherwise.
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Scott Drive If the information refers to a specific product, it may be based on the
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