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MSE News: Government 'Nest' pension fees could hit joiners for 20 years
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Former_MSE_Guy
Posts: 1,650 Forumite
This is the discussion thread for the following MSE News Story:
"Savers who join the central pension fund from 2012 will have to pay a premium to cover set-up costs ..."
"Savers who join the central pension fund from 2012 will have to pay a premium to cover set-up costs ..."
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So if I understand this right. People who have to use this pension scheme will pay a fee of 0.3% per year for the next 20 years. However after 20 years there probably won't be a charge, so free.
Would it be better to just hammer the tax payer now for the cost and let everyone get it free now?
However I am pretty sure that evey pension scheme regardless of source has some kind of annual management fee.
If I am right why such a hype about the charge?
Please correct me as I am getting fed up with overhyped media coverage about good things.
Some facts and figures with examples clearly shown with comparisons would make this an understandable story with perspective.New PV club member. 3.99kW system. Solar Edge with 14 x 285W JA Solar panels. 55° West from south and 35° pitch.0 -
Individuals will pay 1.8% on all contributions, then 0.3% per year.
So if you contributed £100, you would pay a 1.8% charge (£1.80) and then a 0.3% annual charge on the remaining £98.20 (29p).
If you put in a £100 in the following year, you would again pay 1.8% on that contribution. You would also pay the annual charge on the total pot which is now about £200, so about 60p.
In the fullness of time (ie not more than 20 years) the initial charge on contributions will be removed, but the 0.3% annual fee will remain.0 -
Thanks that was the bit eluding me.
In the long run it will still work out better than relying on the state pension.
Also if the new system is poor then people should petition their employers to provide an option.New PV club member. 3.99kW system. Solar Edge with 14 x 285W JA Solar panels. 55° West from south and 35° pitch.0 -
What is wrong with MSE? just like a typical daily mail story: "It was confirmed today the Nest fund will come with a 0.3% annual management charge (AMC) to cover running costs, which means you'll lose 0.3% of the value of your pension pot each year. On a £10,000 balance, that's a £30 fee." - you make it out like thats bad!! You dont get anything for free, and considering current stakeholder AMCs are 1.0% 0.3% is exceptionally cheap. You dont lose 0.3% of your pot - thatss the fee you pay you idiots. THats like saying I lose £1000 a year for my car insurance - I dont, I pay it but get something back in return. You have to pay for something.
If you really want a story you should highlight the fact that the new NEST arrangement is very very poor compared to a GPP in its inability to transfer in/out, contribution limits, investment process, lack of advice, no salary sacrifice, the fact the funds will get so large they will need to ask for the stockmarkets approval before making trades etc.
And then there's the FSA's ridiculous ruling on IFA charging on GPPs which effectively means any company without a GPP setup before the end of 2012 will never set one up, and therefore the bulk of employees will be pushed intp this very poor NEST arrangment.0 -
I think that NEST is a vital component in ensuring that this country can afford to look after pensioners by 'forcing' them to look after themselves.
People have the ability to start their own pensions voa SIPPS and they can even opt out of NEST itself so there is no corecion either really.
With regards to the costs 0.3% AMC is very competitive. If initial people have to pay to fund the set up for a few years then they have to do this or opt out and set up a SIPP.
NEST can only be a good thing and about time there was some real advances in this area - the hardest thing is getting people even thinking about pensions in the first place!0 -
NEST can only be a good thing and about time there was some real advances in this area - the hardest thing is getting people even thinking about pensions in the first place!
This is where the old sales vs advice issue comes in. Historically, pensions needed to be SOLD to the majority of people. You needed the insurance company sales agent to call round to put pressure to start and then top up over the years. When insurance agents largely went away, people were left paying the same amount and didnt top up any more and didnt start new ones. So, whilst salesforces had their issues, they did force people to do something.
You now have have companies offering money purchase schemes where the employer pays into it and you get rates like only 1 in 5 joining the scheme, even with the free money. Mainly as they are not put under any pressure.
With NEST allowing an opt out, I bet you will get significant numbers that will opt out. Hopefully not the majority but I would guess now that the take up rate will be around 70%. NEST is good but it should be compulsary (or where there is an equivalent group/occ scheme that should be). Or maybe compulsary for all those earning over a certain amount to allow the real low earners to be protected.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
With NEST allowing an opt out, I bet you will get significant numbers that will opt out. Hopefully not the majority but I would guess now that the take up rate will be around 70%. NEST is good but it should be compulsary (or where there is an equivalent group/occ scheme that should be). Or maybe compulsary for all those earning over a certain amount to allow the real low earners to be protected.
I didn't know, until recently, that there was an opt out. I'm assuming this applies just to the employee contribution?
It's just too easy to predict what is going to happen in the next generation. State Pensions will decrease (possibly even more than natural attrition due to CPI), on the basis that 'everyone' has a private pension. Except they wont. So they will presumably get 'benefits' as well. Contempory taxpayers subsidising all those who chose to fritter away their 3% (4%?) contributions.
The concept of 'funded' pensions for everyone, to take over the State Pension, is an attractive proposition. Should have started 60 years ago. But unless compulsory, it somehow loses its impact.NDPBs are public organisations but they are not part of the Government and the day-to-day decisions they make are generally independent. However government ministers are ultimately responsible to Parliament for the effectiveness of decisions made by NDPBs.
So a political football then! A choice of funds? Or a single 'vanilla flavoured' fund. Equities only? Or Property, Bonds, Gilts? UK or Global?
Government wants to (say) give UK biochemical science sector a boost. Does the 'order' go out (whisper whisper) to channel a few billion into risky (but cheap) seed capital? Government needs cash, so parcel up a bag of ailing Government Properties, get friendly consortium to buy them - funded by NEST as an 'investment'?
Look at the size of this scheme - after a few years. It will eventually become so massive that it could well eclipse the combined total of all current private funds. How much does it cost to run a single fund of £1 billion? How much does it cost to run a similar fund of £1000 billion? Answer: Very little more. So eventually, the 0.3% will become a massive amount. QUANGO's are absolute experts in how to spend public money. £2 billion to spend on a none-too-hard-working bunch of pseudo civil servants, and another £1 billion to spend on huge 'management' layers, bonuses, fact-finding trips, and jobs for the boys.
Will they do annuities?
So many questions!0 -
I didn't know, until recently, that there was an opt out. I'm assuming this applies just to the employee contribution?
No, it would be both the employee and employer contribution.A choice of funds? Or a single 'vanilla flavoured' fund. Equities only? Or Property, Bonds, Gilts? UK or Global?
Nest has announced initial fund mandates:- Global Equities Developed Fund: a passive global equity fund, benchmarked against either MSCI World or FTSE World indices
- UK Fixed Interest Fund: a passive UK gilts fund, benchmarked against the FTSE Actuaries All Stocks index.
- IL Gilts Indexed Fund: a passive UK index-linked fixed interest fund, benchmarked against the FTSE Actuaries Over Five Years Index Linked Gilt index.
- Cash Fund: a low-risk cash management fund benchmarked against GBP seven-day LIBID.
- Diversified Beta Fund: invested in a broad, diversified range of asset classes. It will invest in funds with a typical performance target of the UK risk-free rate plus 2% - 4% per annum.
Government wants to (say) give UK biochemical science sector a boost. Does the 'order' go out (whisper whisper) to channel a few billion into risky (but cheap) seed capital?
NEST has an independent trustee board so this shouldn't happen. Having said that, one should bear in mind that Kiwisaver in New Zealand significantly increased its domestic investment during the economic downturn as I recall.Look at the size of this scheme - after a few years.
It doesn't get up to full membership and contributions until 2017. At that point, I think they will be getting in something like £5bn a year from some approximate, back-of-the-envelope calculations (not seen any forecasts published, although they may have been).It will eventually become so massive that it could well eclipse the combined total of all current private funds.
Extremely unlikely. Remember there will also be auto-enrolment, so membership of other private sector schemes will increase significantly, and many employers using NEST will presumably be making minimum contributions.Will they do annuities?
No, they are a pension fund. I believe they will have an annuity panel with the major providers.0 -
People have the ability to start their own pensions voa SIPPS and they can even opt out of NEST itself so there is no corecion either really.
Are you aware that there are other choices other than a SIPP ?'In nature, there are neither rewards nor punishments - there are Consequences.'0 -
What is wrong with MSE? just like a typical daily mail story: "
Exactly what I thought when I read it. Do you think that Guy was a personal finance reporter at the Daily Mail before joining MSE has anything to do with it.
The charges overall are still very low and every effort should be being made to make sure as many people dont opt out. How many times do people post on here urging people to join their company scheme to get "free money"- it doesnt really then make alot of sense for sites like this to post "people will be £x worse off" by joining NEST. After all, all pensions have costs, the whole thing should have been put in perspectives.
Purch im with you- I wish people would stop posting that SIPPs are the only type of personal pension!!0
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