Following a government review of pensions, the introduction of the National Employment Savings Trust (NEST) has been announced. Despite mis-leading headlines in the press that employers will have to start making pension contributions for all of their employees from 2012 , the majority of employers will not need to comply with the rules from that date.

The planned start date for the roll out of the scheme is October 2012 but this will impact on employers with 120,000 employees or more. For those with a more modest workforce the start date varies, for example those with less than 500 employees the date is 1 January 2014 and for those with less than 50 employees the earliest start date is 1 August 2014. Employees eligible for automatic enrolment will be:

• those who aren’t already active members of a qualifying scheme
• are aged between 22 years and the State Pension age and
• earn over £7,475 gross a year

The qualifying scheme may be the existing employer pension scheme if it meets certain conditions, or if an employer does not have a qualifying scheme they will have to set one up or use a NEST pension scheme.

Minimum contributions levels for qualifying schemes :

Employees will be able to opt out of the scheme if they so wish. However for those employees within the scheme it is expected that the employer will have to contribute at least 3% of their ‘qualifying’ earnings. These earnings are their basic salary plus commissions, bonuses and overtime between £7,475 and £33,540 a year (2006/07 terms).

Contribution levels will be phased in over a period of time:

** Less tax relief.