Workplace pension auto-enrolment is an important responsibility for UK employers. If you employ eligible workers, you may need to automatically enrol them into a workplace pension scheme and make regular contributions.
NEST (National Employment Savings Trust) is one of the workplace pension schemes available to UK employers.
This guide explains the main steps employers should follow when setting up and managing NEST auto-enrolment.
1. Check Your Auto-Enrolment Duties
Before setting up NEST, employers should understand whether their employees are eligible for automatic enrolment.
Eligibility generally depends on factors such as:
- The employee’s age
- Their earnings
- Whether they normally work in the UK
- Their existing pension arrangements
Employers should assess their employees each time they run payroll because an employee’s circumstances can change.
2. Choose a Workplace Pension Scheme
Employers who have eligible employees need to provide a qualifying workplace pension scheme.
NEST is one option available to employers. Once the employer has selected NEST, the employer needs to complete the setup and provide the required company and employee information.
3. Set Up Your NEST Employer Account
During registration, employers will need to provide relevant business information and details about the people responsible for managing the pension scheme.
Once the account is set up, employers can add employees and manage pension contributions through the NEST portal.
4. Add Employees to NEST
When an employee needs to be included in the pension scheme, the employer must provide the required employee details.
This can include information such as:
- Full name
- Date of birth
- Address
- National Insurance number
- Employment details
- Pension enrolment information
It is important to enter the information accurately because incorrect details can cause problems when submitting contributions.
5. Assess Employees Through Payroll
Employers should assess employees during each pay run to determine whether they meet the requirements for automatic enrolment.
An employee who is not eligible for automatic enrolment may still have certain rights, such as the ability to opt into a workplace pension, depending on their circumstances.
Payroll software can make this assessment easier by calculating pensionable earnings and identifying the appropriate pension treatment.
6. Calculate Pension Contributions
Once an employee is enrolled, pension contributions need to be calculated based on the applicable pension rules and the scheme setup.
The contribution will generally consist of:
Employee contribution + Employer contribution = Total pension contribution
The employee’s contribution is normally deducted from their pay, while the employer’s contribution is paid by the employer.
Employers should ensure that the pension figures on the payroll match the amounts submitted to NEST.
7. Submit Contributions to NEST
After payroll has been completed, the employer needs to submit the pension contribution information through the NEST portal.
The submission should be checked carefully before payment is made.
Common issues can occur when:
- Pensionable earnings are incorrect
- Employee contributions do not match payroll
- A wrong payment reason is selected
- An employee’s pension status has not been updated
- Contributions are missing or partially paid
Checking the NEST schedule against the final payroll before submission can help prevent errors.
8. Understand Pension Opt-Outs
An employee who has been automatically enrolled may decide that they do not want to remain in the workplace pension.
They can usually opt out within the relevant opt-out period.
Employers should follow the correct NEST process when an employee opts out and ensure that payroll deductions are updated accordingly.
If an employee opts out within the permitted period, they may be entitled to a refund of contributions already deducted, subject to the applicable rules.
9. Keep Records
Employers have responsibilities to keep appropriate records relating to automatic enrolment and workplace pensions.
Records may include:
- Employee enrolment information
- Pension contributions
- Opt-out notices
- Payroll records
- NEST submission information
- Relevant communications with employees
Keeping accurate records makes it easier to deal with queries and demonstrate compliance.
10. Don’t Forget Re-Enrolment
Auto-enrolment is not a one-time responsibility.
Employers have ongoing duties, including assessing staff and carrying out re-enrolment when required.
Eligible employees who previously opted out or ceased membership may need to be re-enrolled at the employer’s re-enrolment date if they meet the relevant conditions.
Employers should also complete the required declaration of compliance with The Pensions Regulator.
Final Thoughts
Managing NEST auto-enrolment involves more than simply setting up a pension scheme. Employers need to assess employees, process contributions correctly, maintain records, deal with opt-outs and keep up with their ongoing workplace pension responsibilities.
A good payroll process can make NEST administration much easier. Employers should regularly check that their payroll figures, pension deductions and NEST submissions all agree.
If you are unsure about an employee’s pension status or how to process a particular NEST contribution, it is advisable to check the latest guidance from NEST and The Pensions Regulator or seek professional payroll advice.