National Employment Savings Trust (NEST) and Other Alternatives

NEST was set up by Statute and as such must take any employer’s pension scheme on board, no matter how small.

The Government knew that Insurance Companies and specifically set up Pension Schemes such as Now Pensions and the People’s Pension could decline a scheme for being below their required contribution levels or member numbers. NEST was set up in such a way that it cannot refuse entry.

In our view NEST is not ideal for more senior staff, particularly due to the restricted fund range and limited contribution rates. A employer wishing to attract high quality staff would be well advised to avoid NEST. For 2014/15 the maximum contribution to NEST from all sources is £4,600. No transfers are allowed in or out of NEST (except in the case of serious ill health) and the options on retirement are very restricted. It is understood that the cap and the transfer ban will fall away in 2017.

There are two charges under NEST. The annual management charge, based on the fund value, is set to 0.3% per annum which is fairly low. On top of this however, until at least 2032 or whenever Tata (the Company behind NEST) gets their investment back, is a 1.8% contribution charge.

For staff nearing retirement NEST is a fairly expensive pension scheme. From 6^th April 2015 the maximum charge for Pension Schemes being used for Auto Enrolment will be 0.75%. NEST is exempt from this restriction, although they would argue the overall charge is under this figure. Not for those nearing retirement. The reduction in scheme charges will be followed on 6^th of April 2016 by a commission ban. This is changing the face of how Group Pension Scheme advice is paid for.

NEST provides a slick system for payment of contributions but no assistance in the Assessment of Staff. The employer has to deal with this task themselves or pay someone else to help. Are you confident you could tick all the right boxes?