Existing Pensions that Qualify
There’s no obligation for an employer to use the National Employment Savings Trust (NEST) pension scheme. However, companies do have a requirement to auto enrol their employees into a qualifying pension scheme. It’s possible that an existing GPP (Group Personal Pension) or GSP (Group Stakeholder Pension) will be a qualifying scheme. Final Salary as well as occupational schemes may well meet a large number of the auto enrolment criteria.
Existing company pension schemes may already qualify and depending on the type of pension provision the following rules apply for auto enrolment and NEST qualification;
- Employees must be automatically enroled in a scheme
- There must be a minimum accrual or contribution rate. The majority of schemes will operate on eight percent of earnings, with a minimum of three percent being paid by the employer.
- Workers should be able to join the scheme automatically – which means the input required by the employee to join is kept to a minimum
- A default investment fund must be available. Although this has not yet been made a requirement, it is felt this will be required to ensure a robust process in selecting a fund.
Employers who have existing pension schemes are more than likely to incur higher costs due to increased administration when auto enrolling employees who were not previously in the scheme, as well as the increase in communicating the changes to the workforce.
For companies with no qualifying pension in place the costs will be even higher.
We have designed an employers guide to the new pension rules, please complete the form to download your free copy. Alternatively please contact us for further information or to speak to a workplace pension specialist.