How did we get to be here?Nest Pension Alternatives

Since the Government decided that we should all be steered in the direction of providing ourselves with a pension pot for retirement the day of reckoning has been getting closer and for many large businesses it is already here. The auto enrollment process intoThe NEST PENSION started with large companies and moves on over a period of time and should have reached even the smallest of us by 2018.

All employees who are over 22 years of age and under the current retirement age will be automatically enrolled or opted in. If they wish they can, simply, opt out.

So is it a good scheme, should we welcome it with open arms or could we do a lot better elsewhere. I think a quick look at exactly what will do for us would help.

What’s in your NEST

The first important point about the scheme is that it HAS to accept everyone who wants to remain opted in. This may well be one of the reasons that when the provision of this pension was put out to offers there was only on taker, the Indian truck and steel producer Tata.

Without going into massive details an employer will pay 1% of an employees annual earning into the pension each financial year provided the employee earns between £ 5,668 and £ 41,450 ( they pay nothing on the amount below  £ 5,668). The employee will add 2%, these figures will increase each year till Oct 2018 when the employee will pay 8% and the employer will add  3%. In addition the government will add to these sums but not as a direct payment but as a Tax relief.

for more information go to  https://www.nestpensions.org.uk/schemeweb/NestWeb/includes/public/docs/explaining-minimum-contribution-levels,PDF.pdf

The second important condition is that you can not transfer pension pots in or out of Nest.

Lastly one more condition – you are limited to a maximum contribution of £ 4,400 in each tax year.

Nest Pension Alternatives – is there one for you?

There are other organisations providing workplace pensions and there is always the option to opt out of any form of workplace pension, although you will automatically be opted backing every three years and have to opt out again. Some people just won’t take no for answer. if we rule out opting out and doing nothing,then, the choices fall into two camps:

  • Save regular amounts in another type of investment.
  • Source your pension plan elsewhere

Lets take a closer look at these:

  1. The first is entirely up to the individual. They can invest in property or ISA’s ( or what ever they may be called by then) or indeed in anything that they feel will best provide for their future.
  2. The second option is very different. As an employer it would fall to you to arrange and provide an alternative for your employees. I can’t over stress that as they will have to remain opted in, you must  discuss this with them or their representatives.

Two Independent providers

These are not just any providers but they have years of experience and already provide pension services for impressively large numbers of working people. Unlike the Nest pension these providers are not obliged to accept all comers and you may find them refusing some employees admission to the scheme.

  • The Peoples Pension – Is a not for profit organisation run by B & CE they have managed workplace pensions for over 30 years especially in the building industry and have over 600 firms who trust their pension pots to them. Their annual management charges are low but this comes at a cost of a bit of leg work for you as the employer in setting up and running the scheme. To find out more visit

http://thepeoplespension.co.uk/

  • Now Pensions  – Are supported by ATP the largest provider of pension services in Denmark, oh yes I forgot to say that they are Danish. they have successfully run pension funds for 50 years. funds are invested in five different risk classes to get safety and return, in addition as your pension approaches it’s final years the investment is switched to low risk only investment. they work on a management charge of 0.3% per year plus a monthly admin fee of £ 1.50 which falls to £ 0.30 for those on less than £ 15,000 per annum. Once again more info on

http://www.nowpensions.com/

Both of the above do not limit your annual contributions or prevent the importing of existing pension pots.

The last alternative is to use a pension plan from a respectable provider but not one of the main players that we have already covered. As we move into this area  the restrictions and requirements begin to dig in somewhat. I will briefly mention a couple as I could otherwise go on for too long, these two are:

  • AVIVA – Accept only those will be making contributions of £100 per month or more which equates to an annual salary of £ 60,000.

http://www.aviva.co.uk/pensions-and-retirement/company-pension/

  • L & G – They are seeking double the entry level or in other words £ 200 per month or the employer will have to be willing to pay a £1,000 arrangement fee.

http://www.legalandgeneral.com/workplacebenefits/advisers/workplace-pension/

At last a Conclusion

I hope that this article has helped. The UK pension provision is still in a changing and confusing phase and I don’t doubt that I will be revisiting the subject many times in my short News feeds.

The Nest offering provides a much needed impetus for employees to make provision for their old age although we do appear to be encouraged to accept working till we drop. There are many good reasons to consider alternatives and as an employer I am looking elsewhere. Tata have a 10 year contract with possible 5 year extension and as far as I can see not a huge experience of pensions. They are  based in Mumbai and won the contract to provide Nest by defeating a huge competition of , well, no one.

So far the take up rate has been good with only 9 % opting out of Nest, however, only the large  businesses have entered the arena up to now. It is predicted that when the SME’s have all been processed the op-out rate will be in the order of 30%

I am the age group that remembers the pensions that were misused or simply vanished, along with the company directors, in the past and that makes ISA’s and other investments more attractive. Plus you can get your hands on them much faster.

I’m afraid on this one I can’t tell anyone what to do. I wish you good fortune and I will certainly be following the subject and writing more so please sign up to receive regular updates from my blog.

Now I’ve got that little advert in I’ll be off to sort out my pension.

For  Background information on NEST see my earlier article here

 

 

Tags: , , ,