Britain’s population is ageing, yet many individuals are not saving enough to provide themselves with a comfortable retirement. Recognising that this situation was unlikely to improve on its own, the government introduced the Personal Account, a simple low-cost pension scheme that will begin enrolment in 2012.
What is NEST?
More recently, the scheme has been rebranded as National Employment Savings Trust (NEST). NEST is an independent pension scheme run by a trustee body, NEST Corporation, for the benefit of its members. It is intended to help individuals boost their savings for retirement and is likely to be delivered online.
NEST for employers
At present, 750,000 private-sector employers do not offer a workplace pension scheme. Under the new rules, employers will have to enrol all eligible employees into a qualifying pension scheme and then contribute to that scheme. Employers of all sizes and in all industries can use NEST, which can be used on its own or alongside other workplace schemes. Employers are not obliged to use NEST, but they do have to offer a scheme that is at least as good as NEST if they decide not to take up the option.
NEST for employees
Under the new rules, all qualifying employees will be enrolled automatically into their default workplace pension scheme and then contribute to that scheme, although individuals are able to opt out if they wish. Once enrolled, they are likely to be able to choose how their money is invested from a range of investment funds and if they leave their job or move to one where the employer does not use NEST, they can opt to continue saving in that scheme. Self-employed individuals are also able to join NEST.
The maximum annual contribution into NEST is £3,600 (index linked from 2005), so there is scope for employers and employees to make additional contributions if they wish to top up the minimum contributions. With a few exceptions, transfers in and out of NEST are not permitted, although this will be reviewed in 2017.
A relatively positive reaction so far
So far, NEST appears to have been relatively well received by financial advisers and consumer groups. In particular, Which? personal finance campaigner Doug Taylor has commented, “This is another important milestone… consumers want a brand they can trust working for them and the best return they can get for their contributions. We believe that NEST will deliver that.”
Will NEST deliver the intended result? only time will tell ……