In December 2006, the government
published a White Paper, outlining its workplace pension reforms,
including proposals for NEST (the National Employment Savings
Trust). This led to the Workplace Pension Reforms set out in
the Pensions Act 2008. These reforms aim to increase the
number of people saving for retirement.
A new, simple, low-coast pension scheme, NEST will be introduced
as part of the workplace pension reforms and will have the
following key features:
Charges
NEST will provide people with access to a simple, low-cost
pension scheme. The charges will be:
- A 1.8% charge on the value of each contribution to cover NEST's
start-up costs. If £100 is paid into your pot every month,
the 1.8% contribution charge would be £1.80 per month. Over
one year, £1,200 would be paid into your pot in total. This
means that the contribution charge over that period would be
£21.60.
- An annual management charge (AMC) of 0.3% of the value of the
fund. If your total retirement pot is worth £1,200 at the end
of the year, the AMC would be £3.60.
In total, for that year you would pay £25.20 in
charges.
Investment choice
When you join NEST, your money is invested in a fund that NEST
believes is suitable for most people of your age. This is called a
NEST Retirement Date Fund and there's one for every year up to the
State Pension age that you could choose to take your money out. For
example, if you plan to take your money out in 2058 NEST will
invest your retirement pot in the NEST 2058 Retirement Fund.
The funds focus on the issues which NEST thinks are
important:
- Protecting your savings from the rising cost of living
- Avoiding sudden falls in value
- Making sure you get more or less what you expect
- Taking appropriate risk to grow your fund
- Providing clear information about your account
NEST Retirement Date Funds are designed to suit most
members. However, other funds are offered for people who have
particular preferences about how their money is invested.
Opting out
Employers will need to automatically enrol their eligible
workers into a qualifying pension scheme (which could be NEST) and
make contributions to it. However, you have the right to opt
out within one month of being automatically enrolled if you don't
think that pension saving is appropriate for you.
If you opt out within the one-month period, your employer must
pay back any contributions deducted from your pay. Also, any
contributions your employer has made must be refunded to them by
the pension scheme.
After the one-month opt-out period is over, you can't opt out
and get a refund, but you can stop contributing if you want.
If you do this, any contributions already paid, including those
from your employer, will remain invested in the pension scheme.
Transfers
Transfers in and out of NEST are not allowed (except in specific
limited circumstances). This will be reviewed in 2017.
Contribution limits
The most that you can pay into NEST in the 2012/13 tax year is
£4,400. This includes money you pay in yourself, what
your employer puts in and tax relief. The limit will be
reviewed each year and is likely to increase.
Changing jobs
If you've been paying into NEST through your employer and change
jobs, your NEST pot can move with you. NEST members have one
retirement pot which they can carry on paying into throughout their
working life.
How to join
If your employer has chosen NEST as your pension fund, then you
will be given information about how your NEST account will be set
up for you. Your employer will pay your contributions into
NEST from your wages. You can manage your account online.
If you don't qualify to be put into NEST yet, you can ask your
employer to enrol you in NEST, so that you can pay contributions to
a pension.
If you are self-employed, you can contact NEST for details of
how to set up your NEST account.
