Addressing delegates at the HR Forum on board Aurora yesterday afternoon, Paul Gilbody, director of market engagement at NEST Corporation, said: “From our research, we are finding people don’t understand the terms of pensions, so we are trying to communicate with them in a language they understand.
“To assume all employers have a level of understanding about NEST is inaccurate.”
Under the Pensions Act (2008), legislation will take effect from October next year, meaning by 2017 all employers will have to auto-enrol their staff into a qualifying workplace pension scheme.
Employers will have to contribute at least 3% of staff salary into the fund and staff will add another 4%. Employers that do not offer such a scheme will use the NEST arrangement. Employers will have to implement auto-enrolment on a date dependent on the size of the company, with larger organisations being affected by the legislation first.
The scheme is designed for SMEs, or staff that earn less than £35,000 in salary. It has been legislated by the Department for Work and Pensions and the NEST Corporation (formerly the Personal Accounts Delivery Authority (PADA)) was created to launch and communicate the scheme.
Gilbody said employers would receive a set-up guide and information pack and staff who enrol would also receive detailed information about what the NEST scheme will do.
It is illegal for employers to remove staff from the scheme, so the onus will be on employees to understand their role. The NEST Corporation has already launched its website (www.nestpensions.org.uk) for information and will also have a call centre.
The scheme will offer five fund options: a pre-retirement fund; a lower growth fund; an ethical fund; a Sharia fund; and a higher risk fund. The NEST Corporation predicts the majority of joiners will opt for a default fund.
Gilbody added: “We have already started work with larger employers to talk about how NEST can fit in with their current arrangement. We have done quite a lot of work with accountants on this and have found the scheme will be straightforward to administer, unless employers have a massive amount of [staff] churn. We are offering quite a bit of support to employers – and in return they are helping us with information.”
Responding to a question from a delegate, Gilbody confirmed NEST had not been designed as an alternative to the basic state pension, in the current legislation.