NEST Pensions – Building a Financial Nest For Retirement
Through the Pensions Act of 2008, the UK government laid out new duties and rules for employers to provide their employees with a workplace pension plan that fills certain minimal conditions. According to the new workplace pension reforms, some employees were automatically enrolled (automatic enrollment) for the pension plan and others could opt to join. NEST, as it is popularly called, stands for National Employment Savings Trust and impacts most UK employers and helps over 11 million workers save more for their retirement.
It is a pension scheme for the workplace in the United Kingdom. NEST came into force under the Pensions Act 2008 and the objective was to ease automatic enrolment. Any employer in the UK can use NEST to comply with the workplace pension duties outlined by the Pensions Act 2008.
NEST is a trust-based pension scheme operated by the Nest Corporation on a nonprofit basis which means there are no shareholders. NEST is one of the pension schemes that are permitted to be used by employers to meet their duties under the Pension Act of 2008. As reported in April 2014, there were more than 1 million members who had enrolled for the scheme.
How to opt out of NEST for employees?
To opt out of NEST, it has to be done during the opt out period. The opt out period is usually for one month whose exact dates are given by the NEST in their enrollment letter. It generally happens after the employer has enrolled the employee. You can opt out through online, over call and by post.
Click on the button below to opt out of NEST pension via online
Call on the below number to opt out via call
To opt out via post you have to request for an application by calling them on 0300 020 0090.
NEST For Employees
For employees, NEST helps to build up or increase their retirement corpus. Members are provided an online account that they can access anytime, anywhere to keep track of their retirement savings. There are other types of pension schemes like Small Self Administered Pension (SSAS) or Salary Sacrifice Pension Scheme.
You may ask, why should I go for another pension scheme when I already have the state pension? Well, that’s a good question. But, the answer should be obvious if you look around carefully.You should ask yourself whether you’ll be able to afford the lifestyle that you are living now with your pension. You may have to keep working longer even after your retirement age to fulfill your desires and live comfortably.
NEST, as a workplace pension, helps you put away some extra money for the future while you are working. By saving a little extra now, you’ll be able to build up a significant amount to live a comfortable life post retirement. One should definitely look at NEST pension scheme as there has been update in minimum pension contribution in 2018.
How it Works
NEST helps you establish your retirement pot gradually and steadily. Some amount goes into your kitty every time you get paid by your employer; on top of that your employer could add his contribution. Additionally, you save money as you get tax relief for contributing to NEST. At first it may seem insignificant but with time you pot grows up. You’ll always have more money in your retirement through NEST compared to what you have saved in a bank account.
Employees who are eligible for the National Employment Savings Trust (NEST) pension don’t have to take any steps to enroll. In such cases their employers will make the contributions and it’s the responsibility of the Trust to grow the employees’ money and keep them safe.
As a member you also have control over your Nest pension account and can do the following:
Nest Corporation, the trust owners for NEST pensions, manages employee's money through a NEST Retirement Date Fund. The day you reach 65 or your State Pension Age, you will be eligible to take out the money from your retirement savings. NEST Corporation is public corporation of the Department of Work and Pensions.
NEST – Overview & Evolution
The National Employment Savings Trust (NEST) was formed in 2010 as a trust-based pension scheme. Its aim was to aid the deployment of automatic enrolment. It started in July, 2012 with large employers starting implementation and its rollout is slated to be completed in February 2018. Today, NEST is one of the biggest pension schemes in the UK with respect to member participation. Note that NEST Corporation that runs the NEST pension scheme trust is accountable to the British parliament. The 4-million member strong scheme is collectively run by trustee members and they are responsible for promoting or meeting the purpose of the scheme, which is to provide pensions and benefits to its members.
In 2015, the UK government introduced policies to enable pension freedom allowing greater flexibility and choices to participating members. The pension ecosystem has seen considerable changes since NEST was developed and launched. People now have greater freedom on how and when they use their defined contribution pension savings. Also, the perception towards pensions is shifting, partly due to the change toward pension provisions that are defined by mass market. The pension industry will have to come up with forward-thinking retirement solutions that meet the requirement of customers.
The Current State of NEST Pension Scheme
According to this Government report, NEST: Evolving for the Future, published by the Department of Work & Pensions (DWP),over 7 million employees were enrolled for automatic enrolment by more than 400,000 employers at the end of January 2016. By the end of August 2015, opt out rates were quite less at 9 percent. An analysis by DWP indicates that higher participation in workplace pension schemes will boost automatic enrolment adding an extra £17 billion workplace pension saving annually by 2019-2020.
Highlights of NEST
The removal of restrictions on annual contribution have also sped up participation among smaller employers as they are assured that automatic enrolment with NEST is a good choice for their employees. The benefits of removing these restrictions are two-fold. NEST members (employees) can choose to consolidate their pension savings in a scheme that they favour. On the other hand, it will enable employers using NEST for automatic enrolment to think about amalgamating their current or legacy schemes in NEST. Though NEST will charge employers for bulk transfers per their discretion, members can transfer into the scheme without additional charges. You should also check your state pension age.
Today we see that people’s disposition towards retirement and pensions are shifting. More people are looking at retirement as a transition period rather than an abrupt change. They want the freedom to work with flexibility in their old age. Responding to this change in attitude and keeping its promise to provide greater freedom and choice to workers after retirement, the Government, in April 2015, made changes to how employees could use their pension money. These reforms paved the way for more freedom and flexibility to people with defined contribution (DC) pension pots; now they could decide themselves on how and when to access their savings.
Freedom in accessing your pension means that the clear dividing line between pension accumulation and decumulation has been obliterated. People are now able to reach out to their DC pension pots even from the age of 55 and still have the flexibility to continue employment and saving at the same time. Therefore, NEST now allows pensions to be greatly adaptable, flexible and customizable according the needs of the individual.
The Government, in July 2016, issued a Call for Evidence paper titled "NEST: Evolving for the future.” The Call for Evidence closed on October 2016 and solicited proof from various stakeholders on a) should the government allow NEST to provide additional decumulation services and b) whether there is a scope for increasing the opportunities for employers, employees and other schemes to utilize the services of NEST.
Outcome of the Call for Evidence
The Government refrained from proposing addition decumulation options as the industry assured their desire to innovate. It also said that in the light of market developments and considerable lead in time to develop and launch retirement products, it will keep NEST’s role in offering decumulation products under review. The government also said that it will “continue to monitor the market including reviewing the conclusions of the FCA’s Retirement Outcomes Review later this year.” In the condition the market is not developing new and innovative products that cater to the needs of NEST members, the government will review about the decision to permit NEST to develop and launch a more comprehensive range of solutions. It also encouraged NEST to work along with industry partners to drive innovation in this area.
As more and more individuals start depend upon their DC pension pots to finance their retirement, it is important that workers, including NEST enrollees, have better access to low-cost, well-designed, retirement products that fulfill the objectives of automatic enrolment. Clear evidence is yet to emerge but the ideal products should have a combination of long-term protection, adaptability and a regular income for better outcomes.
More than ever people require retirement products that can provide a good retirement income and will give them the freedom to make sound and informed financial decisions. Lastly, the government thinks that the retirement product market post ‘freedom and choice’ is still at its nascent stage and yet to reach a level of maturity to fulfill the vision of freedom, flexibility and choice.
Any questions? Schedule a call with one of our experts.