Are you ready for NEST in 2012?
More than 100 employers around the UK have agreed to enrol some of their staff in the new national top-up pension scheme known as NEST - the National Employment Savings Trust.
Employers will not be formally obliged to begin the phased enrolment of their staff in Nest until October 2012.
Speaking at NEST live, an event promoting the government-backed low-cost auto-enrol scheme known as the National Employment Savings Trust or NEST, the chairman of the Financial Services Authority (FSA), said everything he has seen so far indicates that "NEST is a great product".
From 2012, auto-enrol will kick off and employers will have to enrol their workers in a workplace pension scheme, although due to the phased-in approach of the scheme, smaller companies won’t begin doing so until 2014.
Aside from NEST, it’s expected that private competitors will introduce their own occupational low-cost schemes but Turner believes without the enforcement of auto-enrolment and a government initiative kick-starting things, the private sector wouldn’t have followed.
Total minimum contributions will eventually have to be 8%, with at least 3% coming from employers. The annual management charge is 0.3% plus 1.8% on all contributions. But NEST says this averages out at 0.5% overall.
'Cause for Optimism’
Pensions minister Steve Webb says NEST and auto-enrolment give "cause for optimism".
"In the world of pensions there aren’t that many exciting days but this is one of them," he says.
"All too often pensions have been baffling and confusing but NEST has freshened things up a bit and it’s good to see other providers working on this."
The Beercroft Report, a recent red tape-cutting exercise, recommended delaying the NEST timetable. Critics have also argued that small businesses are being burdened with the cost of providing an occupational pension scheme to their employees in an already difficult financial time – but Webb says he is committed to the roll-out starting in 2012.
"It is entirely legitimate in a time when the economy is in sluggish growth that government looks at all the things it does that have an impact on business.
"But I am absolutely committed – and this will be the least startling announcement of the day – that 2012 will happen next year."
The National Employment Savings Trust
NEST is a government organisation that aims to provide a simple and low-cost pension scheme designed to give its members an easy way of building up retirement savings. You have one NEST retirement pot for life, whether you change jobs, work for more than one employer at the same time, or leave employment. A NEST scheme won’t allow transfers in and out. From 2012, all employees will be obliged to join workplace pension schemes unless they actively opt out and NEST will be the default fund for those employers who do not create comparable alternative arrangements. It will be phased in from 2012 and all employers will be required to contribute 3% by 2017.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
Annual management charge
If you put money in an investment or pension fund, you’ll not only pay a fee when you initially invest (see Allocation Rate) but also a fee every year based on a percentage of the money the fund manages on your behalf. Known as the AMC, the actual percentage varies according to the particular fund, but the industry average for active managed funds is 1.5%.