Are you ready for 2012?
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In a bid to address the lack of retirement provision in the U.K. the government will be introducing and automatically enrollng employees into the National Employment Savings Scheme (NEST) in 2012
Who will be affected by NEST in 2012?
* Companies with one or more employees
* Employees earning £5035 to £33540 over age 22
Automatic enrollment
All qualifying employees will be automatically enrolled in the new NEST scheme.
Employers can opt to use an alternative qualifying scheme ie Stakeholder, Group Personal Pension Plan, Money Purchase Scheme, if the schemes meet the new minimum standards in terms of contribution levels, auto entrollment of qualifying employees and new employees, provision of a default investment fund.
Existing occupational pension schemes can be used as an alternative to NEST provided they are modified to meet the new criteria.
Minimum Contribution levels
Employer - 3% of employees gross income
Employee - 4%
Government - 1% (tax credit)
Total minimum contribution 8% upto a maximum of £3600 per annum
Opting out
Employees will have the option of opting out of the scheme if they do not wish to join.
Employers are obliged to offer NEST or an alternative qualifying scheme.
Who will run the scheme?
The scheme will be run by a board of trustees. The trustees will run the scheme independent of government and will be regulated by the Pensions Regulator as with all other occupational schemes.
Summary
The government are clearly shifting responsibility for retirement provision away from the state firmly towards the individual and their employer.
We are living longer and spending more years in retirement. 1/6th of the population is currently over the age of 65 with this age group set to increase even more, so planning for retirement has never been so important.
sanjoy.sen@senfinancial.co.uk
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