New pension scheme to be called NEST
New low-cost pension schemes that aim to encourage more people to save for retirement will be called National Employment Savings Trusts – or NEST – when they are introduced in two years' time.
The government’s flagship scheme, the logo of which includes an egg, will become the pension of choice for many workers on low to moderate incomes when they are phased in alongside auto-enrolment from 2012. From this time, all workers will automatically be opted into a workplace pension unless they actively opt out, with NEST the default scheme.
Angela Eagle, minister of state for pension reform, says the reforms will help millions of workers on low and moderate incomes save for retirement through a workplace pension, with their employers also making a guaranteed minimum contribution.
Savers will have to contribute 4% of their gross earnings to NEST, which will be matched by the employer (3% contributions) and the taxman (1% contribution).
Jeannie Drake, acting chair of the Personal Accounts Delivery Authority (PADA), the quango introducing the new pensions, says: "We have one goal in mind - to make saving for retirement become the norm and to put an end to poverty in old age. The release of the new brand is another milestone along the way to achieving one of the biggest social reforms of our generation."
Around 12 million people are also saving in a workplace pension, but auto-enrolment and NESTs aim to ensure all working people are given this opportunity.
Tom McPhail, head of pensions research at Hargreaves Lansdown, says he is optimistic that NEST will have a positive impact on the UK’s retirement savings – but urges workers currently without a pension not to wait until the launch.
“Enrolment into NEST won’t be fully up and running until 2017 and every year of delay means a lower eventual pension,” he explains. “Don’t wait for your employer or the government to take the initiative, start saving for retirement today.’
Hargreaves Lansdown calculates that a 25-year-old aiming to retire at age 65 would see their pension reduced by around one third if they were to delay starting saving until age 30.