NEST - Pushed out next year?

Employers wishing to know when they are scheduled to begin payments towards the new NEST pensions can find a list of dates by clicking here. In practice it will be a year until the first NEST scheme is implemented (October 2012) and then, this is only for the very largest of companies, employing over 120,000 people. Smaller companies and organisations will have until March 2014.

If you would like to set up a NEST scheme, you can do so "very easily" by visiting the NEST website. However be warned that there are limits to the amount that can be contributed and significantly a very small choice of funds (currently just 5). The main advantages of the NEST arrangements are:

1. The investment charges are low

2. The scheme is relatively easy to set up

3. Staff can access and view their account

4. Everyone is opted in if they have not opted out.

In addition, contrary to initial information, it would appear that when moving between jobs it will be possible to consolidate NEST pensions, however it is my understanding that it is not possible to move NEST into other pensions and vice versa.

NEST is aimed at low income earners who are not providing themselves with pensions. It remains to be seen if this will "solve" the problem. It may form part of a range of options available to employers. Importantly, the contributions will be 5% from the employee and 3% from the employer in due course. Contributions are currently limited to £4,200 per tax year, so anyone with an income above £52,500 will find that they cannot contribute significantly towards the pension. Many people will however find this allowance significantly more than they had been contributing. The current tax year restricts pensions contributions to the larger of £3600 or 100% of earnings, up to £50,000.

Contributions start with 1% from the employer and 1% from the employee (2% in all) until September 2016, thereafter 2% from the employer and 3% from the employee (5% in all) until October 2017 when employers must contribute 3% and employees 5% (8% in all).

The alternative is arranging your own pension arrangements, ideally one that has a good choice of funds (after all the size of the pension will be based on how much the pot is worth). This also allows more choice and flexibility for staff. However, having fund choice is only an advantage if it is used.

The NEST site is fairly good, although it is quite easy to find yourself using it in a rather circular fashion. In summary this is a pension for low earners, there is very limited investment choice and charges are low. Alternatives (individual or group personal pensions, or SIPPS) will be more expensive but offer considerably more investment options. It might be reasonable to say "you get what you pay for".

Here is a video from NEST, I'm not sure if it was deliberate that one of the characters wears a hat rather like Jack Nicholson in the movie poster for "One Flew Over The Cuckoos Nest" but it may be a deliberate intent to appeal to blue collar workers, mind you, quite how much a pint of beer will cost in 40 years time is anyones guess.