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The Actuary The magazine of the Institute & Faculty of Actuaries

FTSE100 firms sticking with NEST alternatives

Only two FTSE100 firms intend to adopt NEST as their main pension offering for new employees, according to a survey by Towers Watson.

Instead most of the UK’s biggest firms plan to use their existing arrangements, with modifications where necessary, to meet the auto-enrolment criteria under the forthcoming Pension Reform guidelines from 2012 onwards.

The research, which analysed responses from 96 FTSE100 firms, shows that some 41% already auto-enrol their employees into defined contribution (DC) schemes, and a further 28% state they will change their joining approach as a result of the 2012 pensions reform. The position of the remaining 31% remains unclear, the consultant said.

Only 8% of companies believe that no changes need to be made to their current arrangements in order to comply with the new requirements. This compares with 25% the year before.

According to Towers Watson, overall DC membership remained unchanged during the last year, with around half of all employees of FTSE 100 companies being members of a DC pension scheme. However, the number of non-joiners has increased to 23% from 18% the previous year.

Paul Macro, senior consultant at Towers Watson commented: "It is alarming to note that almost a quarter of FTSE 100 employees choose not to, or are not eligible to join their company’s pension scheme.

"With less than 18 months to go until the phased introduction of the requirement for companies to auto-enrol employees into a qualifying scheme, some companies will need to give serious consideration to their benefit provision. They also need to decide whether they will update their scheme design to become a qualifying scheme, use NEST or use a mixture of both all of these options could bring administrative headaches for payroll and HR teams."