Government presses ahead with Nest and auto-enrolment

The government has confirmed it will press ahead with auto-enrolment and retain the national employment savings trust (Nest).

In its completion of its review Making auto-enrolment work, the Department of Work and Pensions (DWP) said employees earning more than the personal income tax allowance of £7,475 will be automatically enrolled into a pension scheme from 2012. This is £2,000 higher than Labour’s proposed threshold of £5,035 year.

Employees will also have an optional three-month period in which they can choose to voluntarily opt in.

Brendan Barber, general secretary at the Trades Union Congress (TUC), said: “We are concerned at the increase in the threshold for auto-enrolment and the three-month waiting period. The main losers from this increase will be part-time women workers, the least-likely group in the workforce to have a pension. The linking of the auto-enrolment threshold to the income tax threshold will make this worse if the coalition continues to raise the basic tax allowance.”

Compulsory auto-enrolment will be enforced from October 2012, with employers phased in gradually over four years according to their size. The largest employers will be first.

In addition, the process for employers to self-certify their money purchase schemes meets the minimum requirements has been simplified, alongside further deregulatory measures designed to reduce the burden on employers.

Nest will go ahead as planned but details have yet to emerge about the minimum contribution rate for the scheme. Under the former Labour government, it was proposed employers would contribute a minimum of 3%, while employees would put in a minimum of 4%.

The Nest Corporation said that more details would emerge about the national scheme, due to be launched next year, will be released in the coming months.

Tim Jones, chief executive of the Nest Corporation, said: “Nest will have an important role to play in helping millions of people to save for retirement. It was good to have endorsement of that role from stakeholders across the landscape, and now by government.

“We have been busy over the summer developing Nest to ensure the scheme will meet the needs of our members and be easy for any employer to use to comply with their new duties.”

Steve Webb, pensions minister, said: “Our reforms will ensure millions of people will start to save for their retirement, many for the first time. I welcome the sensible and balanced proposals from the independent review team, which will help to ensure automatic enrolment works. Building on the consensus for pension reform, Nest will play its part as we transform the savings culture in this country.”

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