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Auto-enrolment and NEST

The Government introduced the Employers’ Duties in 2012 with the aim of increasing the number of employees saving into a pension. The Duties commenced from October 2012 for the largest employers and will be rolled out over a six year period, based on employer size. The Duties require employers to automatically enrol eligible employees into a company sponsored pension scheme. The pension scheme chosen by the company must either meet minimum contribution levels, or provide minimum benefits, as prescribed under legislation, in order for it to be considered as a ‘Qualifying Scheme’ under the Duties.

Qualifying Schemes

Under the rules, a Qualifying Scheme is an occupational or contract-based pensions scheme, sponsored by the employer, that meets statutory minimum criteria, including the following:


  • Allows the auto-enrolment of all employees between age 22 and the State Pension Age (SPA) with ‘Earnings’ over £9,440 (2013/14 thresholds);
  • Allows temporary and contract workers to be enrolled providing they meet the above criteria;
  • Permits other eligible employees to be enrolled at their request; and
  • Automatically enrols employees within three months of starting employment.

Minimum benefits/contributions

  • For Defined Benefit schemes:
    • a valid contracting-out certificate is held covering an employer’s jobholders, indicating that the scheme is an appropriate replacement for the state earnings related pension scheme; or
    • it provides broadly equivalent or better benefits than the benefits which a contracted0out scheme is required to provide.
  • For defined contribution schemes, the minimum contribution requirements are being phased in between October 2012 and October 2018. The minimum level of contributions depend on the definition of pensionable pay which is used, but will eventually require a minimum employer contribution of at least 3%.

Investment options

Defined contribution schemes must have a default investment option so that an employee is not required to make an investment choice following automatic enrolment.


National Employment Savings Trust (NEST) is one of the Qualifying Schemes which employers can use to meet their new employers’ duties. NEST is a national defined contribution pension scheme which has been designed to be easy for employers and employees to use.

NEST is aimed primarily at low to median earners who currently do not participate in workplace pension saving, and has some special features which make it unique from other occupational pensions schemes, including:

  • Customer engagement primarily through e-channels;
  • Each member will have a single account to receive all contributions, including from different employers;
  • Admission of self-employed workers;
  • A limit on contributions of £4,500 per annum (based on 2013/14 figures);
  • Accessible to all employers who wish to use it to fulfil their new Duties;
  • Transfers in and out of the scheme are prohibited (in the short term except in some special circumstances).

Proactive planning now can help employers identify what they need to do in order to comply with the Duties, as well as what options are available to mitigate any increase in costs or disruption to existing pension arrangements. Where take up of existing arrangements by employees is relatively low, employers do not currently make any pension contributions, or where contributions fall below the minimum threshold required, the financial implications could be significant. This makes the need for careful planning vital.
Even where an employer’s current pension scheme meets the Qualifying Scheme standard, action may be necessary – for example, where employees are not currently auto-enrolled into such schemes and changes to systems and processes are required to facilitate this. Additionally, employers may need to review pensionable salary definitions and the administration systems operated by trustees or other pension providers.

As you approach your staging date, Deloitte can help you review your current arrangements and identify the changes you need to make under the Duties. This can include advice on the selection of a Qualifying Scheme, where you do not already have a suitable arrangement.

The savings that can be achieved by implementing SMART Pensions can be substantial and is one way for companies to help mitigate the potential cost increase as a result of auto-enrolment.

Assurance services

Additionally, we are able to provide assurance services for pension schemes which include understanding of your risk and control environment in this area, and testing of the relevant systems and processes. These services can be provided jointly with existing internal audit resources or as an outsourced solution. Learn more about the extent and benefits of our pension assurance services.

Key contact

  • Andrew Mewis
    +44 121 695 5071
  • Neil Campbell
    +44 141 304 5010
  • Jeremy Towler
    Senior Manager,
    +44 113 2921 415

Find out more

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