Brian Mclean

It has been recognised for some time that there is generally a large shortfall in pension provision across the UK and in an attempt to improve the situation the government has announced the introduction of the National Employment Savings Trust (NEST) in April 2012. Previously referred to as 'Personal Accounts', this new employer based pension scheme will be offered to all employees as a way of saving for retirement. Under the new system, all employees over the age of 22 will be automatically enrolled into a NEST pension scheme unless their employer already offers a suitable alternate pension.

Employees will be required to contribute 4% of 'band earnings' (£5,715 - £38,185) and employers will have to contribute a further 3% (although this will be phased in from 2012 starting with 1% and increasing to 3% by October 2016). A further 1% will be paid in the form of tax relief meaning that a total contribution of 8% of band earnings.

The Personal Accounts Delivery Authority (PADA) will assist and advise both the Secretary of State for Work and Pensions and the Pensions Regulator about matters relating to the establishment and operation of the scheme and the new measures will be compulsory for all employers (although employees will retain the right to opt out if they wish).

Automatic enrolment is a key component of this pension reform - a measure designed to challenge the inertia that prevents many people from saving for retirement and open up the possibility of workplace pensions to millions, many of whom have never saved into a pension before.