The government may be planning increases in the Basic State Pension that could endanger plans for a new national initiative to provide all workers with company pension schemes.
The government’s auto-enrolment review body has been asked to investigate whether current proposals for the National Employment Savings Trust (NEST) would ‘strike an appropriate balance’ between costs and benefits to workers and other stakeholders.
This was hinted at over the period of the recent budget, when it emerged that the government would now reconsider the scope of the NEST proposals for providing each worker with access to an occupational pension scheme.
Given that NEST currently proposes to ‘auto-enrol’ and provide a pension for almost all employees, it is thought that any review of the scope of the initiative could only mean a scaling down of the scheme.
Possible increase to Basic State Pension
The auto-enrolment review body has also been asked to assess what effect an increase in the Basic State Pension would have on the NEST scheme.
Pensions minister Steve Webb is known to support a higher Basic State Pension as the keystone of state support in retirement, and claimed earlier this year he did not believe that government could do little to improve the state of company pensions – which was widely taken to be a reference to the proposals for the NEST.
Originally, all companies were to join NEST in 2012. Companies will now be phased into NEST by size, largest first, over a 3-5 year period.
As proposals stand at present, once it is fully up and running, all employers will be paying 3% of salaries into NEST, with workers paying 4% and government paying 1%, bringing total contributions to 8%.
Experts have pointed out that a NEST pension would be of little value to older employees, as their pension savings would not be invested for long enough under the scheme. Both employers and employees would be wise to seek unbiased financial advice on their company pension options, when considering any possible NEST initiative in the future.
