The new government is to review plans to provide company pensions for all through the National Employment Savings Trust (NEST).
The new pensions minister Steve Webb has said that the scope of the NEST scheme, which is intended to ensure that all workers have access to pensions, will be looked at again. The NEST scheme is due for launch in 2012, and in its current form is set to raise the percentage of those holding company pensions from the current 55% of employees to around 80% by 2017. The minister said that the structure of NEST as the delivery system for the new pensions will also be looked at.
Under NEST, all workers who do not have company pensions would be ‘auto-enrolled’ into a national company pensions scheme, administered by their employer, but with their pension savings managed by government. Only those who actively opt back out of NEST will not participate.
Since the scope of the scheme would offer entry to a company pensions scheme to all workers, any review of its scope is likely to scale down that plan.
Employers who provide a company pensions scheme through NEST will pay 3% of the employee’s salary into the company pensions scheme, while workers pay 4% and government 1%, giving total contributions of 8%.
However, employees who retire in the future with a NEST pension must also consider that it may affect their entitlement to government pensions credits, which currently provide a state pension ‘top up’ of over £30 per week for those with no other income than the basic state pension. Their income from NEST could reduce their entitlement to pension credits, as these are a means-tested benefit.
Workers who are now 50 or older may also gain little from NEST, as their contributions in the coming 15 or so years are likely to result in an insignificant pension income when they retire.
