Pension advice crucial as Government pension deadline nears
Nine out of 10 UK firms will need pension advice, with the roll-out of Government pension reforms and the National Employment Savings Trust (NEST)*.
Employers are entitled to opt out of the NEST national pension scheme, provided that they make other provisions to provide a workplace or occupational pension for their employees.
Over half (56%) of medium-sized firms state they will use a financial adviser for pension advice, as they consider joining the NEST government pension scheme, or setting up an alternative pension plan for their staff.
Many companies wish to maximise control over their pension contributions and pension benefits. These companies are likely to use pension advice to install company pension schemes that make them exempt from the compulsory government pensions under the NEST programme.
Requirements of the NEST Government pension
All employers who opt for the Government’s NEST scheme will be paying 3% of salaries into NEST government pensions, as part of total contributions of 8%. Separately from these employer contributions, NEST is likely to involve substantial administration costs for managing pension contributions and pension benefits at most companies.
Government pension means higher take-up
For employers with existing pension schemes, experts predict that pension take-up in the NEST would jump from the average 55% of employees to nearer 80%, raising pension administration costs substantially.
As the NEST government pension scheme is likely to be run as economically as possible, so that it can be justified to taxpayers, the resulting pension benefits are predicted to be less generous than better-invested company pension schemes.
This is also predicted to boost demand for pension advice on alternative pension schemes which will gain a company an exemption from NEST.
*Source: Personal Accounts Delivery Authority (PADA)
