'Not got a pension? You will do in two years!' blog discussion

smileyt_2

I find pensions horribly confusing. Due to ill-health and only working part-time, my pensions record is shot to bits. I don't even earn enough to pay tax. Due to my extremely frugal lifestyle I get by on what I have. Will I have to pay into this NEST thing even if I'm below the taxable limit?

I know I'm heading for a cold baked beans pension but you can't save for a pension if you haven't got the money in the first place.

And apart from housing benefit/ctb I'm not entitled to any benefits because I'm not ill enough to be 'on the sick' (nor would I want to be, unless of course I was totally incapacitated) but not well enough to cope with full-time hours. I'd better get stocking up on those baked beans .....

stebiz

I thought I already paid a percentage of my wages into a Pension. It is called NI contributions. So when this is made compulsory the NI contributions will eventually never go near a pension pot!!

MothballsWallet

I'll be opting out of this one by whatever means necessary. I've already got a private pension, which will be worth less than my shoe size by the time I retire, so why should I pay into a government-requested (sorry, demanded, this is the New Labour Reich we're talking about here) scheme?

So, who's going to be behind NEST? Some of the same bunch of banking brains who got us into the recession, no doubt.

A good idea in theory, but they'll royally mess it up in practice. And employers' alternate schemes only have to be at least as good as NEST will be, so if NEST turns out to be a pile of poop, then employers can breathe a sigh of relief if their schemes smell like month-old leftovers.

jamesd

stebiz, NI is already part of general taxation, which pays state pension payments as part of current spending without putting any money aside for future bills.

The Pensions Commission noted that the pension means-tested Minimum Income Guarantee being uprated with wages instead of inflation would end up meaning that most pensioners would be receiving it. So to solve this future tax problem as well as some other issues they proposed several steps:

1. A low cost pension scheme with people being opted in automatically.
2. Changing S2P, the earnings related part of the state pensions, to gradually become flat rate, which starts in the 2010-11 tax year with a gradual move. The money taken from average and above average earners is used to increase the payment to the lowest earners.

The effect is intended to be that most pensioners will have an income that's at least sufficient so that taxes will not have to fund MIG payments to them.

At the moment NEST fails to be cheaper than open market alternatives except, perhaps, for those making the very lowest incomes. It might help to achieve lower costs for all through its competitive effect on the market, as the preceding Stakeholder pensions did. My guess is that this is how it will end up delivering most of its benefits, to those not using NEST as well as those who are stuck with it.

MothballsWallet, if you aren't given a choice it might be worth it just to get the money from your employer. Not always. For some who are a long way from retirement and who can use better investment options than those that NEST eventually offers it will be possible to not take the employer money and still lend up better off than in NEST. Not unlikely for those who can handle higher risk investments and are near the start of their working lives. Much less likely for those who want low risk investments or who are near to retirement.

Clowance

I do wonder if politicians have any idea about the real world. I live on the south coast - very high housing costs, most jobs around minimum wage.
Personally, I had a good job (and I am educated to Masters degree level) then due to illness and other circumstances after having a baby I had to stop work. When I went back to work after 5 years, I could only get a job which was close to minimum wage. My husband is an electrician working for a company and does not earn a huge amount either, together we can just about pay the bills for our family of 4 with a very few luxuries (holiday, don't drink or smoke).
My pension arrangements are: many tiny company ones from my original career (worth very little as only about 2 years contributions in each), and a small amount (about 3000) in an opted out personal pension. Since I went back to work we have NOT had surplus money to pay into pensions let alone when I wasn't working (where do these people think non earners get money from to top up pensions!!) although I was paying in to the NHS scheme while working there as a bank employee. Unfortunately now laid off due to hospital overspend of their budget - so no income at all again.
My pension will be pants, but I cannot afford to pay anything extra from my small earnings assuming I get another job soon. Get real governement, we don't all have expenses to pay for our moats and directorships for doing f all! rant over (for now!)

cliveoram

NI contributions supposedly contribute to a State Pension, but people are living far longer than was anticipated when that was started so now we have a two pronged approach: 1) Everyone will retire at a later age and 2) they will have to pay more contributions while they work to provide enough to live on.
Let's get this clear; this is nothing more and nothing less than an additional tax, (we have no choice - so it's a tax); worse still it is not controlled by Government so someone will get rich at our expense. Is this democracy??

countrygirl27

So what would happen to someone like me? I am a teacher, been teaching 3 years and paying into the very good teachers pension.
Presumably I wouldn't pay in, but if I left teaching as I am currently intending to do in about 2020 I would then be paying in?
That means when I retired id have a teachers pension, state pension and this new pension?

jamesd

countrygirl27, just the pension for teachers. It'll be good enough to meet the requirement that you're opted in to some scheme. There won't be a requirement for you to use this new one.

cliveoram, your employer is required to sign you up for some pension when you start but you can opt out. That pension doesn't have to be the NEST one and it's certain that competitive pension providers today will see this as an opportunity to sell more pensions.

issmatty

so in thirty years time you would have paid for two lots of pensions that could still as worthless as the current state pension as it is all relient on the wobbley share market, i think the only way to make money from this is to get a job running it or get on the long term unemployed or sick as they will prob give you one for free as long as you have never worked for it or are not from the uk
another stealth tax

jamesd

issmatty, the basic and additional state pensions are together worth something in the £6,000 to £7,000 range and the amount doesn't depend on the stock market. In addition there is the minimum income guarantee, delivered in the form of pension credit, that would top that up to about £7,300 if means testing shows it's required. Housing and council tax benefit also under means testing. An additional pension at the level of this one is likely to eliminate the need for the means tested benefits.