National Employment Savings Trust

The National Employment Savings Trust (NEST) is a defined contribution workplace pension scheme in the United Kingdom. It was set up to facilitate automatic enrolment as part of the government's workplace pension reforms under the Pensions Act 2008. Due to its public service obligation, any UK employer can use Nest to meet its new workplace duties as set out in the Pensions Act 2008.^[1]

National Employment Savings Trust

Abbreviation	NEST
Founded	2008
Location	London
Region served	United Kingdom
Website	www.nestpensions.org.uk

The Pensions Act 2008 established new duties which stated that employers need to provide their UK workers with access to a workplace pension plan that meets certain minimum standards. Some workers will be automatically enrolled into the pension plan and others can ask to join. The former is called 'automatic enrolment^[2]'. These reforms affect the majority of UK employers and are intended to help up to 11 million more people save for retirement.^[3]

National Employment Savings Trust (NEST) is one of the qualifying pension schemes that employers can use to meet their new duties. It was set up as part of the government's workplace pension reforms. Nest is a trust-based defined contribution pension scheme, run by a trustee (Nest Corporation) on a not-for-profit basis. In April 2014 Nest Corporation announced that it had over 1 million members saving in the scheme.^[4]

Charges

Nest is free for employers to use.^[5] Members pay a 1.8% charge on contributions plus a 0.3% annual management charge (AMC) on their total pot. Together, the charges are broadly equivalent to a 0.5% AMC for most types of saver.^[6] In March 2014 the government announced it plans to apply a charge cap of 0.75% of funds under management on default funds of DC qualifying pension schemes from April 2015.^[7] As of June 2021 there is no mention of any cap on charges in the official Nest website.^[8]

Contributions

Nest was established with an annual contribution limit, which in 2011/12 was £4,200.^[9] The contribution limit was reviewed each year to keep it in line with average earnings; by the 2016/17 tax year, the limit had increased to £4,900.^[10] Alongside the contribution cap, Nest also had a legal restriction preventing individual pension transfers into the scheme, except in limited cases such as bulk transfers arranged by employers. Both the contribution limit and the restriction on individual transfers were designed to keep Nest focused on helping people with low to moderate incomes by preventing it from becoming a general pension consolidation vehicle. In July 2013, the Department for Work and Pensions (DWP) announced plans to remove both restrictions, and they were formally abolished on 1 April 2017, enabling savers to contribute without limits and transfer in other pension savings.^[11]

Minimum contribution

As of June 2021, there is a minimum contribution limit of 8% of "qualifying earnings", paid collectively by the employee and the employer.^[12] Qualifying earnings are a section of a worker's pay. For the 2021/22 tax year this is everything over £6,240 and up to £50,270. The qualifying earnings band is reviewed by the government each year.^[13]

Maximum contribution

As of June 2021, there is no maximum contribution limit.^[12]

Transfers in

As of June 2021, transfers into Nest are allowed.^[14]

Transferring out

As of June 2021, transfers out of Nest are allowed.^[15]

Investment approach

Members who are automatically enrolled into Nest are put into a Nest Retirement Date Fund. The NEST Retirement Date Funds are managed according to the life stage of members in them. Members can change funds at any time after enrolment if they want to. Nest also has a small number of other fund choices.^[16]

Establishment

Proposed by the Labour Government in a May 2006 white paper; the infrastructure for Nest was established through the Pensions Act 2008.

The creation of Nest—originally known as "Personal Accounts", was one of the recommendations of The Second Report of the Pensions Commission – A New Pensions Settlement for the Twenty-First Century (2006) under the chairmanship of Adair Turner.

The Pensions Act 2007 established a transitional body, the Personal Accounts Delivery Authority (PADA) to advise on the implementation and launch of Personal Accounts. PADA consulted on various aspects of the final scheme before passing these responsibilities to Nest Corporation, the trustee of Nest.

The current Chair of Nest Corporation is Brendan McCafferty.^[17] NEST Corporation's chief executive is Helen Dean.^[18]

See also

• Minimum employer contribution
• Pensions in the United Kingdom
• Canada Pension Plan
• Pensions in the United States
• UK labour law
• Basic state pension
• KiwiSaver
• The People's Pension