Pension changes 2012 onwards: what impact on you and the economy?

jamesd

A SIPP is the same type of thing as NEST. So are personal pensions in general.

NEST is an expensive pension scheme with major restrictions* that is available to employers as one of the options that they can offer to their employees to comply with the requirement to auto-enroll employees in some form of pension. It's expected that the high cost will be combined with limited investment choices. That makes NEST a way for an employer to make it clear that they don't care about their employees' pensions.

The Pensions commission advocated auto-enrollment into a low cost pension scheme. The auto-enrollment is being delivered but NEST isn't delivering on the low cost part of the plan. Instead it's more expensive than some of the readily available private sector alternatives. Not all of them - it's easy to find more expensive alternatives as well as cheaper ones.

If an employer offers NEST, ask them to offer something decent instead. Hargreaves Lansdown is likely to be cheaper and I'm sure that there will be many other alternatives by the time it becomes mandatory.

*Expensive: 2% initial charge on all contributions, 0.3% annual charge, even though competitive private sector pensions are available that have tracker funds at rates equal to or lower than that rate. Restrictions: transfers out will be prohibited, so once you're into the charges, you can't get your money out again and move it to a better private sector scheme. For comparison, even a SIPP, usually more expensive than personal pensions, is available from a provider like Hargreaves Lansdown with 0% to 0.25% initial charge and trackers at less than 0.3% and the flexibility to choose a very wide range of other options ig desired, without the lock-in.