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NEST Spells Trouble on the Horizon for UK SMEs

posted 24 Sep 2010, 09:01 by Mpelembe Admin

The UK has an aging population many of whom currently reach
retirement age having failed to provide sufficient financial
resources to independently support themselves through
retirement. This represents a painful long term budgetary
headache for the UK government and more importantly the UK
taxpayer who will have to fund it.

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.

If employers do not offer their own Workplace Pension Plan
(WPP) then by default they must adopt the governments
National Employment Savings Trust (NEST) defined
contribution scheme. 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. Miss-management
of employee pensions could precipitate legal action.

For many small and medium sized firms it makes sense to
outsource the implementation and administration of their
pension scheme and outsource payroll processing 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.


About the Author:

Richard Barlow works at McGregors Corporate an accountancy
firm with offices throughout the Midlands UK. For further
information about cost effective pension and payroll
outsourcing come to: => http://www.outsourcepayroll.org.uk

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