UK to phase in new pension scheme

The U.K. government is implementing a new workplace pension scheme that will help the low-to-moderate earners and employers.

A new National Employment Savings Trust (NEST) will be established and become the default option for employers without a pension scheme automatically.

The government intends to proceed with the implementation of auto enrollment on the basis of recommendations made by an independent commission, Aon Hewitt, a human resource services company, said in a report.

The earnings threshold at which an individual is automatically enrolled into a workplace is to be aligned with the income tax personal allowance, the report said.

Currently, the threshold is at 6,475 pounds but it will be raised to 7,475 pounds for the next fiscal year.

However, the threshold at which pension contributions become payable will be aligned with the National Insurance primary threshold, which is at 5,720 pounds. This will reduce the chances of low earners who might not benefit from the auto enrollment from being included, and ensures that the people who are included have a reasonable sized pension pot when they retire, the report added.

NEST is an attempt by the U.K. government to ensure all its citizens are covered by pensions, particularly during weak economic conditions.

NEST will be implemented from next year, when employers either pay a minimum of 3 percent into the scheme or automatically enroll workers in an existing pension plan.

Larger employers will need to phase in their employees into the scheme earlier than the smaller ones. However, if an employer is already making contributions over the minimal required level, they will not be required to migrate into the new scheme.