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NEST trundles along

Retirement | Occupational Pension

By Justin Modray, published 29 October 2010.
Helpful? 4

Will the univeral NEST pension save us all from a cash-strapped retrement? Or will it end up yet another doomed attempt at solving the pension gap?

The National Employment Savings Trust (NEST) is a national pension scheme that all employees earning over a certain sum will be automatically enrolled into. The scheme, due to start in 2012, has been on the drawing board for several years now.

The Government has announced the income threshold for joiners will be £7,745 (although contributions will be based on earnings above the National Insurance threshold, currently £5,715) from 1 October 2012 and the scheme will be phased in over 4 years, with only those companies employing 120,000 or more people having to implement the scheme from day 1 (which is probably not that many).

By 2017 employees will have to contribute 4% and employers 3%, with 1% tax relief. But at the start it seems overall contributions will only have to be 2% - far too low for a decent pension. There are a number of potential issues surrounding NEST (see the bottom of our pension page for more info), especially the Government's proposed 2% charge on contributions intended to claw back the costs of setting up the scheme - although 0.3% annual charges should prove very competitive.

The ideal is worthy, but I've yet to be convinced that NEST will be a success.

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Readers' Comments (1) - To post a comment please register or login .

Comment by webwiz at 11:18pm on 03 Nov 2010:

When it comes to pensions the difference between the micro level and the macro level rarely gets mentioned. It may make sense for an individual to save for his retirement, and if he does he may get a larger share of the national output when he stops work - but only at someone else's expense. For while an individual can save, ie defer consumption, in aggregate we cannot. Pretty much, what we produce we have to consume. There are only a few investments that society in the aggregate can make such as construction, education and research but these do not amount to much and do not defer consumption for generations as would be required to fund the pension of a young worker. So governments exhorting citizens to save more for their pensions is either misguided or is a means of raising money for current use by the state.