With an estimated 7 million employees failing make adequate financial provision for their retirement the government have planned to introduce a new way of enabling employees to save. The new system NEST (National Employment Savings Trust) will operate from October 2012 by making both employers and employees contribute at set rates. The government will seek to increase the contributions by building up to 3% for employers and 4% for employees from 2012 to 2017. The aim of the scheme is to provide more security and give employees the “push” that they need to make better financial provision post retirement. It will give lower earners the opportunities they may currently be denied through lack of access to a good company scheme.

For employees

For all those employees who fear they cannot afford such contributions… the government have stated that this will apply to employees who earn above a minimum and maximum salary from 22 to state pension age (currently 65 for men and rising to 65 for women). You can opt out of this scheme but this does not give you complete freedom as you will be automatically re-enrolled at regular intervals. It is the employer’s job to police this and re-enroll you. If you are already in a pension scheme that is deemed acceptable then you may well escape the clutches of NEST.

For employers

Enrolment of employees is immediate under the new law. You are not entitled to wait. The only exception to this is if you operate your own pension scheme whereby you may be entitled to a 3 month waiting period to bring staff into the pension plan. If you are a large employer with more than 1,250 staff then you will be required to effect the new scheme from October 2012, a medium sized employer (more than 50 staff) can expect this to be rolled out next followed by small employers with less than 50 staff estimated for completion in 2016.

The message: government wants us all to save for our retirement and spare them the headache.

Emily Yeardley