Personal accounts: feathering the NEST

For several months now, UK employers have been coming to terms with the main aims of the pension reform agenda. For them, the main elements are the fundamental right of almost all employees to a company contribution, through either a qualifying company pension scheme or personal accounts, and the need to auto-enrol employees into a pension scheme from 2012.

Yet the past six weeks have produced some significant changes to this agenda. UK employers need to be aware of these changes to avoid confusion.

The first changes were announced as part of the pre-budget statement made by Alistair Darling in early December 2009. This statement included the welcome news that the full impact of the employer contribution to a pension scheme will not be felt until at least 2017, a welcome relief for many employers still deep in a recessionary mindset.

But the twin objectives of auto-enrolment and personal accounts now seem to have been split, so while the full employers’ contribution has been delayed, it appears that, for many employers, auto-enrolment will still be taking place in 2012, with some smaller employers delayed only until 2013.

Steve Herbert, head of benefits strategy at Origen, said: “From the perspective of UK plc, a delay to the full implementation of the company contribution is to be hugely welcomed, as this gives breathing space to employers that had not been able to plan adequately following the impact of the recession. It is intriguing, though, that auto-enrolment remains on course, even without a significant employer contribution. There have been some concerns that auto-enrolment will leave some employees worse off, and this may heighten that possibility.”

In an unconnected statement last week, the Personal Accounts Delivery Authority (PADA) announced that the working title of personal accounts is to be rebranded to the National Employment Savings Trust (NEST), at a reputed cost of some £360,000. Commenting on the rebrand, Jeannie Drake, acting chair of PADA, said:

“The release of the brand name today is another milestone along to the way to achieving the biggest social reform of our generation.”

The response from the savings industry has been mixed. Commenting on the name change, Herbert said: “To be frank, I am quite surprised at how benign the reaction to the rebrand has been. This is already the third name that has been applied to the concept of a universal saving scheme, having already exhausted the

National Pension Saving Scheme (NPSS) and personal accounts. While personal accounts was not a great name, employers have only just got used to this. Now we have NEST, and this is likely to confuse employers who may believe this to be yet further legislation.

“The brand name is not going to make or break the success of this reform,” he adds. “If brand names worked that well, there would be no need for a national scheme in the first place. The pensions industry has spent millions of pounds over the years on branding, yet employees still need to be convinced to save. From an employer’s perspective, this changes nothing. The need to plan how each employer will react to, and interact with, this legislation is still pressing.”

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