MSE News: Government unveils Nest pensions charges

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"The Government has received a mixed response after announcing its charges for its new pension scheme, which starts in 2012 ..."

Read the full story:

Government unveils Nest pensions charges

ffacoffipawb

MSE_Guy wrote: »

This is the discussion thread for the following MSE News Story:

"The Government has received a mixed response after announcing its charges for its new pension scheme, which starts in 2012 ..."

Read the full story:

Government unveils Nest pensions charges

Hopefully irrelevant after May 6th.

jamesd

So lets see:

1. 0.3% ongoing annual charge and 2% on money going it. Hargreaves Lansdown offers HSBC's UK all share tracker fund at 0.25% annual charge and 0% on money going in, so NEST that was introduced at the urging of the Pensions Commission to be cheaper than other pensions is more expensive than even one SIPP, let alone competitively sold personal pensions.

2. You can't transfer money out of NEST to a more competitive deal, even though you can for other workplace pensions.

3. The NAPF claim that the charges match those of the best workplace pensions today is ridiculous. I have a FTSE All-Share tracker at work with a 0.1% annual charge and no initial charge, so this proposal is three times as expensive even without the initial charge.

Anyone threatened with having to pay into NEST should be asking their employer to set up a decent, competitive, low cost scheme instead.

If your employer won't do that, alternatives include the relatively high risk option of getting 30% tax rebate on VCT investments, or using personal pensions. Today these don't get employer contributions but that's another discussion you can have with your employer.

dunstonh

As it currently stands, there is also no higher rate relief on NEST.

hugheskevi

As it currently stands, there is also no higher rate relief on NEST.

Dunstonh, could you reference this please?

My understanding is that the individual's contribution rate is 4%, covering the band of earnings between about £5,000 and £35,000 (ish).

But, that just determines what the contribution is, and after that the contribution would receive tax treatment in the same way as a contribution to any other type of pension.

dunstonh

Dunstonh, could you reference this please?

My understanding is that the individual's contribution rate is 4%, covering the band of earnings between about £5,000 and £35,000 (ish).

All you read says employees will contribute 4%, employers 3% and the government 1%.

I havent seen anything that suggests the Govt contribution will increase if you are a higher rate taxpayer.

hugheskevi

All you read says employees will contribute 4%, employers 3% and the government 1%.

I havent seen anything that suggests the Govt contribution will increase if you are a higher rate taxpayer.

I've followed Personal Accounts/NEST closely and I'm certain that the contributions will be eligible for higher rate tax relief - the 4/3/1 line is about pitching tax relief as a matching contribution, which people tend to understand better, rather than a different system of tax relief.

I think the tax relief will operate in the same was as personal pensions do currently, ie basic rate relief at source, with higher rate relief claimed from HMRC.

I imagine this might cause a bit of a problem for higher rate taxpayers not subject to self-assessment given the existing number of people failing to claim higher rate relief.

stphnstevey

The real cost to employees will be the lack of salary increases due to employers compensating for their compulsory employer contributions.

The money has to come from somewhere, employers are not getting anything extra to contribute to employees pensions.

2% charges on contributions will be nothing in comparison to a 2% loss in salary increase

PS - how long will the 2% charge last for?

Batchy

stphnstevey wrote: »

The real cost to employees will be the lack of salary increases due to employers compensating for their compulsory employer contributions.

The money has to come from somewhere, employers are not getting anything extra to contribute to employees pensions.

2% charges on contributions will be nothing in comparison to a 2% loss in salary increase

PS - how long will the 2% charge last for?

I guess it depends how long you keep paying in contributions for lol

yelf

Dont forget at least one of the investment options wil be HEAVY in gilts (so basically the goverment will be borrowing from the pension funds they receive from forcing employees hands)

stueystu

Hmm, run this by me again we are will now have to pay an additional amount into a pension scheme... no choice... forgive me but is this not why i pay national insurance? if so why do we have to pay into 2 pension schemes?