Finance Matters: Is there a cuckoo in your NEST?

July 4, 2014

Business owners and HR Managers: you should be aware by now of the government’s decision that all employers, no matter how small, have to enrol their staff in a new national pension scheme (NEST), unless they offer a comparable pension scheme to their staff.  This scheme has now been introduced for large companies and is being phased across to all companies by 2016.

But what is NEST?

Well, NEST is the National Employment Savings Trust and is a defined-contribution pension scheme. By the time the scheme is fully introduced employers will be contributing 3% of their employee’s salary and employees 4% (plus 1% tax relief).  The contributions will be invested and when members retire, they will have to use the money to buy an additional pension. The most important element of this scheme is that it will ensure more people save for their retirement.

The scheme intends to offer a low risk, low return investment strategy.  Whilst I applaud the government for finally tackling the pension crisis that has been simmering for at least 20 years, in my opinion, this blanket view will not suit everyone. Employers should explore options that could reduce their admin costs and offer a more attractive scheme to their employees and prospective employees.

The Federation of Small Businesses estimates the expense of the scheme’s admin and contributions for a small business with 4 workers earning £25,000 at £2,550 per year.  If you have more employees on higher salaries, the costs rise.

My experience is that many employers are still under prepared for this important legislation so I would urge you to check your provisions now.

If you have any questions about this article, contact Paul Holiday of GreenSky Wealth on 01603 340800.


This article is for general use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

GreenSky Wealth Ltd is an appointed representative of Financial Limited which is authorised and regulated by the Financial Conduct Authority. FCA No: 516410