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Personal Accounts/NEST – The story so far… 
The Pensions Commission found that between 9.6 and 12 million people were undersaving based on the benchmarks they set out. In order to deal with this issue, the Government will be introducing a national pension savings scheme as from April 2012. The scheme was initally known as the ‘personal accounts’ scheme but is now called the ‘National Employment Savings Trust’ or simply ‘NEST’

Employees and employers will be forced to contribute to a NEST account on behalf of the employee, unless the employee chooses to opt out.

Under this new scheme, all employees will be automatically included in a NEST scheme unless their employer already offers a suitable alternative pension scheme. Importantly employees will be forced to contribute 4% of band earnings and employers will have to contribute 3%. A further 1% will be paid in the form of tax relief meaning that a total contribution of 8% of band earnings will need to be paid into the NEST scheme.

Employers must contribute 3% of band earnings, currently described as 3% of employee earnings between £5,000 and £33,500. Employers will be able to phase this in, starting at 1% in 2012, 2% between 2016 - 2017, and 3% by October 2017. In addition, each employer will need to offer an auto-enrolment facility for all members of staff which will need to be in place by the beginning of the 2012 tax year.

Employees will need to contribute 4% of salary, unless they elect to opt-out of the scheme, while HMRC will contribute a further 1% by way of tax relief.

Small employers with fewer than 50 workers will not have to take part in the scheme until sometime between March 2014 and February 2016.

Employers must give new staff basic information about the scheme and staff must be enrolled within a month of starting work. Employees will then be given a further month to decide whether to opt-out.

Employers who already offer employees a pension scheme will have to ensure that their existing scheme is a Qualifying Workplace Pension.

Employers that do not currently offer employees a pension scheme, or those whose schemes do not pass the scheme exempt test and are therefore not considered to be qualifying workplace pension schemes will have to act to comply.

Many details regarding NEST accounts are yet to be finalised and we will aim to keep you posted with the latest developments.


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