The changes to the pension laws in the UK which are due to be rolled out by the Government starting this year have not been greeted with universal delight by the business world. Mainly because they involve considerably greater commitment by business owners, both financial and administrative, to make them work. Understandably this is a concern for small businesses in particular because many are struggling to keep afloat in a difficult economy making any further financial outgoings a serious burden, but the aim is to get more people to prepare early for their eventual retirement – something which is badly needed.
The changes revolve around something known as the auto enrolment pension, which essentially means a pension scheme that, those who are eligible for, will be automatically signed up for rather than choosing for themselves whether to do so or not. Clearly it is felt that not enough employees – particularly younger ones – are presently opting to plan for their futures as anyone over the age of 22 will be eligible for the scheme. Under Now Pensions auto enrolment plan the eligible employees will still have the choice of opting out, but will have to take this option themselves – whereas currently they have to decide to opt in to a pension fund themselves.
The national pension scheme that has been set up by the Government to handle to auto enrolment pension plan is the National Employment Savings Trust (NEST), and under this plan businesses are expected to contribute towards each employee’s pension which is part of what has made many business owners uneasy about the new plans. If your business already has a private pension fund set up it is not necessary to shut this down and use the NEST instead, but the existing pension fund will have to operate on an auto enrolment basis from this year for all employees who fit the eligibility criteria. Furthermore, you will still have to contribute the minimum 3 percent of the qualifying earnings for each employee who chooses to remain within the scheme rather than opting out.