Cost of new pensions scheme for Small Businesses

From October 2012, all employers must automatically enrol staff (with only a few exceptions), into a pensions scheme, and provide an employer’s contribution. In time, this will also apply to any family that employs a nanny (if earnings exceed a threshold), and the likes of builders who have a couple of full or part time workers.

With an aging population, and small businesses making up 99.3% of all businesses in the UK, the purpose of NEST (National Employment Savings Trust), is to make it easier to save for retirement. Thousands of small businesses do not realise the impact of the ruling, and the extra cost it will incur to their business.

How much will it cost?

The Government is estimating that administration will cost businesses £46 per employee. According to the Federation of Small Businesses, it will be an “administrative headache” for small companies as they struggle to survive in the current climate. Ultimately, qualifying employees will need to put in 8% of their earnings into their pension pot, with at least 3% of that total contributed by their employer.

NEST will begin to be phased in next year for large businesses (over 800 employees) and then staged over four years, with companies who have less than 50 employees affected from March 2014.   If your business already has a pension scheme in place, you may not need to use NEST and can run it alongside. The pensions are also portable, and as an employee moves jobs, their pension and contribution pot move with them.