In December 2006, the Government
published a White Paper, outlining its workplace pension reforms,
including proposals for NEST (the National Employment Savings
Trust) - previously called Personal Accounts. This led to the
Workplace Pension Reforms set out in the Pensions Act 2008. These
reforms aim to increase individuals' savings for retirement.
A new, simple. low-cost pension scheme, NEST will be
introduced as part of the workplace pension reforms and will have
the following key features.
Governance
NEST will be a trust-based defined contribution
occupational pension scheme. It will be regulated in the
same way as existing trust-based defined contribution schemes.
Charges
NEST will provide people with access to a simple
low-cost pension scheme. The charges are
expected to be:
- A 2% charge on the value of each contribution to
cover NEST's start-up costs; and
- An annual management charge of 0.3% of the value of the
fund.
Investment Choice
Workers will be automatically enrolled into the default fund but
there is likely to be a choice of investment funds, which may
include options such as social, environmental and ethical
investments.
Those not wishing to make an investment choice, will stay in the
default fund.
Anyone who joins NEST will be able to continue to save in the
scheme even after they leave the workplace or move to an employer
that does not use NEST.
The self-employed and single person directors are not eligible
for auto-enrolment but will be able to join NEST.
Opting Out
Employers will need to automatically
enrol their eligible workers into a qualifying pension scheme and
make contributions to it. Workers will be able to opt-out of
their employer's scheme if they choose not to participate.
Workers who give notice during the
formal opt-out period will be put back in the position they would
have been in if they had not become members in the first place,
which may include a refund of any contributions taken following
automatic enrolment.
Transfers
Transfers in and out of NEST are not allowed (except in specific
limited circumstances). This will be reviewed in 2017.
Contribution Limits
There will be an annual contribution limit of £3,600 (in
2005 earnings' terms) into NEST. This will be uprated by earnings
year on year. This limit will be reviewed in 2017.
Click
here for advice for EMPLOYEES
Click here for advice for
EMPLOYERS
