As a small business owner, staying on top of employer legal requirements can sometimes feel overwhelming, especially when it comes to employee pensions. One obligation for businesses in the UK is auto-enrolment, a legal requirement for most employers to automatically enrol eligible workers into a pension scheme.
Navigating these rules can be a little bit tricky, but that’s where Nest Pensions comes in. This simple, cost-effective solution is designed to help small businesses comply without breaking the bank. In this blog, we’ll walk you through Nest Pensions, the auto-enrolment process, and how it can work for your business. No confusing jargon or fluff, just easy actionable advice!
What is Nest?
Nest (National Employment Savings Trust) is a government-backed pension scheme designed to make it easy for employers, particularly small businesses, to set up pensions for their staff. The scheme was created to help employers comply with the auto-enrolment rules without incurring high costs or administrative headaches.
As a small business, you might not have the resources or budget for more complex pension plans. Nest is ideal for businesses that want a straightforward solution, offering affordable setup and low management fees. It’s a straightforward way to ensure your employees are saving for retirement, while ticking off your legal obligations.
Understanding pension auto-enrolment
Auto-enrolment is a legal requirement in the UK, meaning that if you have employees who meet certain criteria, you must automatically enrol them into a pension scheme. It doesn’t matter whether you run a startup or a growing company, auto-enrolment applies to all businesses, big and small.
Luckily, the criteria for auto-enrolment are nice and simple:
- Age: Employees aged between 22 and the State Pension age.
- Earnings: Employees earning more than £10,000 per year (as of 2025).
- Working in the UK: Employees must work in the UK to be eligible.
If an employee is eligible, you need to automatically enrol them into a pension scheme like Nest and make contributions to their pension pot. However, they do have the option to opt out within a month if they don’t want to save into the scheme. While businesses are required to make pension contributions, employees can choose whether to stay in the scheme or not.
It’s also a good idea to stay on top of these thresholds, as they can change each year. Fortunately, Nest and other pension providers typically update their criteria annually, so your business will be kept informed of any changes on the horizon.
Is Nest cost-effective?
One of the main reasons small businesses choose Nest is its affordability. Compared to traditional pension schemes, Nest is very cost-effective. The setup is free, and there are no ongoing monthly management fees. The only costs you’ll face are the contribution payments you make on behalf of your employees. These contributions are mandatory under auto-enrolment rules, but with Nest, there are no hidden or excessive fees to worry about.
For many small businesses, the main concern when it comes to pensions is the potential costs. With Nest, you don’t have to invest heavily in setting up a pension scheme, especially when your employees may choose to opt out. This means you can comply with the law without committing a large portion of your budget to something that may not be used by all employees.
Costs breakdown
- No setup fees: Nest makes it easy to get started, and you won’t need to spend money upfront to set up a pension scheme.
- Low administration fees: Nest charges a small management fee (around 0.3% of funds invested) which is relatively low compared to many private pensions.
- Employee contributions: You will need to make contributions on behalf of your employees. The legal minimum for employer contributions is 3% of qualifying earnings (as of 2025), but you can choose to contribute more if you wish.
For most small businesses, Nest’s low setup cost and minimal administration make it the ideal choice for fulfilling auto-enrolment duties without straining budgets.
What if an employee opts out?
As we mentioned above, even though auto-enrolment is a legal requirement, employees can choose to opt out of the pension scheme. This usually happens within the first month after being automatically enrolled, and if they do so, you won’t need to make contributions on their behalf.
However, the decision to opt out should be left to the employee. As a business owner, your job is to make the process easy for your team, ensuring they understand their rights and obligations. You should also make sure they are aware that they can rejoin the pension scheme at any time if they change their minds.
Nest vs. other pension schemes
Nest is not the only pension provider out there, and depending on your business needs, you might be considering alternatives. However, the simplicity and cost-effectiveness of Nest make it a strong contender, especially for small businesses. While there are other options with more complex investment portfolios, Nest’s approach keeps things straightforward, with low fees and no setup costs.
If you’re a business owner with employees who may not be looking to contribute large amounts to their pensions, Nest is a great choice. However, if your employees are likely to earn higher salaries or your business is looking for more tailored investment options, you might want to consider other pension schemes. It’s important to note that if you choose another scheme, you’ll need to ensure that it meets the legal auto-enrolment criteria and offers competitive fees.
Need help with pensions or other aspects of your business’s finances? Contact us today.
