Small businesses make their NEST

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Francois Badenhorst
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It had been feared that auto enrolment (AE), the legislation making it compulsory for employers to enrol eligible employees in a pension scheme, would lead to a capacity crunch.

But as of yet, the capacity crunch remains missing in action.

The phased roll out of AE means that the smallest businesses - by far the largest chunk of the 1.8 million employers expected to be covered by this legislation - started a staggered staging process in July 2015. This process will culminate in 2017, the order determined by a company’s PAYE code and workforce profile in April 2012.

“Yet hordes and hordes of employers aren’t stuck at the door trying to get a scheme because NEST has taken on nearly 50% of this population of small businesses,” says Steve Brice, business development manager at LP Auto Enrolment Solutions. “So no one has been turned away, as far as I know, with nowhere to go.”

No one has been turned away, as far as I know, with nowhere to go.”

NEST has a Public Service Obligation meaning that they must take on all who apply to use them, explains Brice.

The attraction to NEST may be that it is perceived as ‘free’. That is true in the sense that the government provider doesn’t have an employer charge, but it’s a little more complicated than just that, explains Brice. There are some aspects of the AE process it doesn’t cover.

“With NEST, you still need to deal with employee assessment and communications yourself as NEST will not cover all of your obligations in this respect.

“If you were to adopt NEST, you still have to find a way of assessing your staff. So categorising them into the various categories, including eligible job holders, non-eligible job holders. Whether you do that yourself with a pencil or paper, which is not impossible, or whether you pay for additional software from your payroll provider.

“NEST doesn’t provide all the communications. NEST only sends letters to the people who are enrolled, not the people you haven’t enrolled. And you have a statutory duty to inform these people that, although they aren’t enrolled, they’ve got a right to join.”

According to Brice, the decision is completely up to employers, but the consideration over what provider you select should be more nuanced than ‘free and not free’.

“NEST is a pension provider - no harm in that at all, it performs a very valuable service - but don’t rule out other providers who do have an explicit charge as you may be getting more for your money than you at first thought.”

 

The best place to start when thinking about how to choose your pension provider and scheme is The Pensions Regulator’s website. Make sure you know your duties – their online duties checker will ask you a few questions based on your individual employer circumstances and tell you the tasks you need to complete and by when. Most employers are able to check their duties in around 5 minutes (you will need your PAYE number to hand). Visit our website to find out more.

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