Nest auto enrolment for agency workers

bluebell321

dunstonh wrote: »

There are two small fund options. One is called stranded pots and the other is called triviality. The latter allows you draw the pension as a lump sum, minus tax if the value of all your pensions is under £18000.

Thanks again.

So to clarify, this fresh NEST pot would only be accessible in full if my other pension ( 12 years contributions, but no longer allowed to pay into I believe) and this one were below 18k and it would be taxed. At what rate? Basic rate rather than the 25% tax free drawdown?

What's the alternative if the amount is negligible but combined pots greater than 18k?

dunstonh

So to clarify, this fresh NEST pot would only be accessible in full if my other pension ( 12 years contributions, but no longer allowed to pay into I believe) and this one were below 18k and it would be taxed. At what rate? Basic rate rather than the 25% tax free drawdown?

If the other pension is based on years of service rather than fund value then 18k is calculated by 20x income.

it would be taxed. At what rate? Basic rate rather than the 25% tax free drawdown?

25% of the pot is tax free with the remaining 75% taxed as income in tax year your take triviality. If it takes you into higher rate then higher rate tax will apply.

What's the alternative if the amount is negligible but combined pots greater than 18k?

Stranded pots

jamesd

bluebell321 wrote: »

Is there a point where it is not beneficial to be opted in ( if you don't earn enough?)

Yes. It depends on things like your interest in pensions, age, the employer contribution and a range of other things. For some it will be more sensible not to accept auto-enrolment into NEST (or Morrison's) but the rest are pretty much always a good idea.

It doesn't depend on low earnings really, it's more about costs and investment choices. Higher earners might be unable to use NEST properly because there is a cap on how much can be paid in, so some employers might be forced to use something else just to comply with the law for those employees.

bluebell321 wrote: »

Other agencies seem to be signed up with NOW pensions

Of the three major ones aimed at auto-enrolment that looks like the best to me, so kudos to them for making a good choice from the schemes aimed at the low pay market. It has just one investment choice but that one has a good reputation and someone who doesn't like it can transfer out to any other pension from time to time.

bluebell321 wrote: »

If I eventually get enrolled with two providers, can I request to be with just one or am I stuck with whichever provider each agency has chosen?

You can transfer effectively all personal pensions used for auto-enrolment except NEST. NEST insists that once you have a NEST account you have NEST as well as any others, by banning transfers out until you are at least 55 years old.

Because of the restrictions it's only really decent to use NEST to get what the employer will pay in and never pay in any more than it takes to get that.

For someone who is both quite young and interested in investing and doing serious retirement planning it may even make sense not to use NEST at all at the moment, due to the low employer contribution, while the tax saving is available in any other pension that could be set up at the same time.

There's talk of removing the transfer restriction sometime. Until that happens, if ever, it'll remain the lemon of the auto-enrolment pension options because you're stuck having an extra pension pot with poor investment selection and relatively high costs.

It's a pretty lousy option but better to take lousy than nothing.

If you're not 55 and are seriously interested in pension planning and learning about investing it is worth wondering whether it's worth using the NEST one at all, at least while the employer contribution is as low as it is at the moment.

bluebell321 wrote: »

What's the alternative if the amount is negligible but combined pots greater than 18k?

The stranded/small pots rules let you take up to four pension pots of value up to £2,000 each. Up to two defined contribution/personal pensions like NEST and up to two defined benefit / final / average salary types.

But you can combine pots much smaller than that, including NEST if over 55. To do it with NEST you have to be 55, unenrol, transfer, then enrol again. So just combine all except NEST into one and grumble about NEST being a dog and you'll be fine. So you can end up with one central pension plus NEST.

bluebell321

jamesd wrote: »

Because of the restrictions it's only really decent to use NEST to get what the employer will pay in and never pay in any more than it takes to get that.

For someone who is both quite young and interested in investing and doing serious retirement planning it may even make sense not to use NEST at all at the moment, due to the low employer contribution, while the tax saving is available in any other pension that could be set up at the same time

Thanks for a very detailed post.
So out of Nest and NOW pensions, NOW pensions is far better you say?

This is my problem. I work for five different agencies and will probably earn very little per annum from each. One as I have just found out uses NEST and I've been enrolled even though I earn a pittance to date with them this financial year.
Two other agencies that provide me with more work use NOW but I haven't been enrolled yet. No idea what the other two agencies use.

Before I had been enrolled, I had been thinking of looking into SIPPS as it bothered me that I was no longer contributing to a pension ( after 12 years of contributions).

This seems to complicate things. I'm also concerned about Dunstonh's remark. If I understood correctly, I may have difficulty doing a SIPP if am classed as an optout.

bluebell321

Ok, so mulling all this over. Perhaps it is sensible to stay opted in to whatever agencies enrol me on and pay extra into a SIPP where I have more control once I've explored it more.
Then once reach 55, transfer the minuscule pots to the main pension I had contributed to for 12 years ( assuming possible?) and concentrate running a SIPP as the serious pension savings vehicle.
Good plan?

...... Then again using simple figures at extreme low end:
If I earned say 1k over the year at this particular agency. That's just £20 contributions at 1% per year (1% from me plus 1% from employer). Won't charges just make this a complete waste of time despite tax rebate and free money from agency.
Repeat the principle five fold.
Isn't it better to cut losses and accept that going multi-agency has a down side in this instance nd I should just concentrate on the SIPP route as long as I can get around the problem highlighted above in post number 9 with opting out status?

jamesd

bluebell321 wrote: »

So out of Nest and NOW pensions, NOW pensions is far better you say?

Not sure about far better, but better. All three schemes aimed at the low end aren't great for investment choice but that one looks like the best of the bunch because of the combination of charges, probably good default and only investment choice for those who don't pay attention and the ability to transfer out to get more choices or when changing job.

bluebell321 wrote: »

I'm also concerned about Dunstonh's remark. If I understood correctly, I may have difficulty doing a SIPP if am classed as an optout.

Only if you use an IFA. It wouldn't be an issue for any of the DIY SIPPs or DIY non-SIPP personal pensions.

You do still get 1% employer contribution from the agencies. If you think you'll end up working with them longer term that's worth having if it'll eventually get to say a few hundred Pounds. If you think it'll only ever reach say fifty Pounds it may not be worth the administrative hassle and that's so little that transferring it might even be difficult.

If the main pension is defined benefit - final salary, average salary or similar, you can't transfer into it.