subject: NEST is Coming Home to Roost for UK SMEs [print this page] Copyright (c) 2010 Richard BarlowThe UK Government and UK taxpayer both have painful long term fiscal headaches to sooth in the form of an aging population many of whom currently reach retirement age without sufficient financial resources to support themselves through their retirement.The 2008 Pensions Act laid out the detail of the UK government's Workplace Pension Reforms intended to address the problem. The cornerstone of the reforms is a requirement for all UK employers to automatically enroll their employees in to some form of pension scheme unless the employee specifically chooses to opt out.The National Employment Savings Trust (NEST) is the governments own defined contribution pension scheme designed to act as the default scheme if employers choose not to provide an alternative Workplace Pension Plan (WPP) meeting specified minimum standards. The important thing to appreciate is that no matter what form of pension scheme they choose all UK employers will have to provide a scheme for their employees whether they want to or not.Auto-enrolment will begin in 2012 with the biggest employers and will conclude by 2017 when all firms must enrol staff. The date when auto enrolment becomes necessary for individual firms depends on the last two digits of their PAYE reference number.Complexity and administrative costs mean small and medium sized enterprises often don't offer a pension scheme to employees. Soon this burden will have to be carried by these firms. Firms will have to make sure they contribute the correct amount in to their employees pension plans and modify their payroll functions to ensure the appropriate deductions are made from employee salaries. Failure to do so could result in litigation by employees whose pensions have been miss-managed.For small and medium sized firms it will prove much simpler to outsource the implementation and management of pension and payroll arrangements to an accountant. Outsourcing payroll and pension administration is a simple solution to the complexities and associated risks created by being involved in a pension scheme. A suitably qualified accountant will have the technical expertise to accurately manage contributions and will be legally responsible for any errors. The accountant is also likely to be acting for numerous other clients who have outsourced payroll and pension scheme functions which will give them the requisite specialist knowledge, experience and tools to do so more efficiently and therefore at a lower cost.
