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Is NEST the only scheme for A-E?

So Auto-Enrolment is the government initiative to ensure everyone who is employed starts their own pension, got that bit.

Where I start to get confused is with NEST.

Is NEST 'the only official provider of auto-enrolment pensions'?

What I mean is, how does NOW Pensions fit into this? And are there others?

Comments

  • dunstonh
    dunstonh Posts: 116,040
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    Auto enrolment requires employers to pay into a qualifying workplace scheme. This could be a defined contribution scheme with a minimum contribution or a defined benefit (or hybrid scheme) which meets certain conditions.

    NEST is just one of the options. However, an individual stakeholder or personal pension with employer contributions could satisfy the requirements potentially.
    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.
  • hugheskevi
    hugheskevi Posts: 3,784
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    NEST is the only scheme which is forced to accept any employer which wants to use it. Aside from that and a few rules prohibiting transfers in and out and contribution limits, it is a pension scheme just like any other.

    This is because of concerns a few years back that some small employers would not be able to find anyone willing to provide pensions to their staff. Hence NEST was set up to serve that part of the market, with restrictions put on it to prevent it competing in parts of the market where it wasn't needed and existing pension companies already served.

    Other schemes, notably B&CE People's Pension and NOW pension have said they will accept any employer, but do not have an obligation to do so, unlike NEST.

    A very big player in automatic enrolment space is Legal and General, but all of the big providers will get extra business.
  • jamesd
    jamesd Posts: 26,103
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    NEST is not the only official provider of auto-enrolment pensions. It's just one of thousands or tens of thousands of pensions that can be used for auto-enrolment, all of which are officially approved by the regulators.

    There are just two main requirements: that employees are enroled automatically and that a certain level of contributions is paid. No requirements at all for it to be NEST or any other specific pension scheme.

    It seems that a NEST sales person may have been trying to mislead you or your employer.

    What NEST is, is the has to be available to all fallback option in cases where nobody else might want the business. In that case, NEST will have to take it anyway. As it turns out there are at least two other players in the low contribution value end now so there's no need for NEST to play that role. So it might have been needed but it turns out that it isn't.

    NEST is the lemon of the auto-enrolment bunch and any employee threatened with it should work with their co-workers to ask their employer to pick one of the decent alternatives instead. The key driving factors are that it bans transferring out, has a very limited range of investments that you can't escape from by transferring out and has a cap on how much the contributions can be, so some employees will either have less than they could going into their pensions or an employer will have to have two different pension schemes running to cover all employees.

    The three main schemes aimed at the low end of the auto-enrolment market are:

    NEST: can't transfer out, very limited investment options. 0.3% of investment value annual charge plus 1.8% of each amount paid in. I think this is the lemon of the bunch due to its ban on transferring out combined with limited investment choice.

    Now: Pensions: can transfer out, only one investment option, with an excellent reputation that makes it a great choice for employees who don't pay much attention to pensions, while those who do pay attention can transfer out. The Danish version of this investment fund won best pension fund in Europe awards for six of the last seven years. 0.3% of investment value as annual charge plus £1.50 a month from what employees pay in, with discounts on that for employees earning under £18,000 a year until October 2018, starting at just £0.30 a month now.

    People's Pension: very limited investment options, can transfer out. 0.5% of investment value in annual charges.

    Of those choices I generally think that Now: Pensions offers the best deal: a probably great fund for those who don't pay attention and a transfer out option for those who do and want that.
  • mania112
    mania112 Posts: 1,981
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    If a company don't use NEST but offer an alternative instead, what would stop them 'setting it up' then cancelling their premiums.

    either a) because they can't afford them or b) they offer the employee a higher salary instead.

    Seems like there's many opportunities to break this initiative.

    P.S - All these questions are hypothetical and not related to me personally.
  • dunstonh
    dunstonh Posts: 116,040
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    If a company don't use NEST but offer an alternative instead, what would stop them 'setting it up' then cancelling their premiums.

    No different to NEST.

    It would be a breach of law and it would have to follow that process.
    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.
  • jamesd
    jamesd Posts: 26,103
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    For an employer to offer more pay to someone not to be in the pension is against the law and the employees can take the matter to an industrial tribunal. They aren't allowed to ask when hiring someone if that person will want to use the pension. They aren't allowed to give different bonuses to those in or not in the pension, nor different pay rises for that reason.

    Employees can opt out to save their portion and can use flexible benefits plans to do the same but an employer can't just say that those who don't sign up get more pay.

    The employer can cancel the pension plan if they want to but the law then requires them to auto-enroll the employees into another pension scheme.

    The employer can use normal redundancy or insolvency procedures or try to adjust prices if they can't afford the extra 1% on their payroll cost. They can no more refuse the pension payment than they can refuse to pay NI or Income Tax.

    Whether it's NEST or any of the other thousands of pensions that can be used doesn't matter. It applies to them all.
  • hugheskevi
    hugheskevi Posts: 3,784
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    If a company don't use NEST but offer an alternative instead, what would stop them 'setting it up' then cancelling their premiums.

    either a) because they can't afford them or b) they offer the employee a higher salary instead.

    They have a statutory obligation - so just like a company cannot pay less than the minimum wage because they can't afford them, they cannot stop the pension contributions (they could reduce them to the statutory minimum though, should they currently have pension provision above that level).

    Offering a higher salary would be a clear inducement to opt-out and lead to fines. However, if instead of offering a higher salary if someone opted out, a company decided to reduce pay across the board due to the higher contributions that would be okay, as an individual would not have an incentive to opt-out (there would be employee relation issues/contractual/union issues, but they are another matter).
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