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The National Employment Savings Trust (“Nest”) is the UK Government’s pension scheme introduced following the Pensions Commission’s 2005 report and is intended to encourage people to save for retirement.

In fact it isn’t a new scheme, just a rebranding of the Personal Accounts Scheme which has been in operation for some time. The real difference comes is that from 2012 instead of being a voluntary scheme it will become one into which all employers will have to auto-enrol their staff.

NEST is a not-for-profit organisation and will act as a public service provider, allowing any employer to use it. It is designed to target low to middle income earners not currently saving into any pension plan. Simplicity and low charges will be a key element of the scheme – a 2% initial charge on contributions plus 0.3% annual management charge.

A key element of the scheme is that both employer and employee have to contribute a minimum amount into the scheme. Currently it is proposed that the employer should contribute 3 per cent or gross salary paid and the employee 5 per cent.

The NEST scheme is not without controversy. Many commentators are concerned that those on low wages may not benefit from joining NEST due to the potential loss of means-tested benefits. In 2009 the Department of Work & Pensions published a report which claimed that despite losing some means tested benefits over 95% of NEST saves could expect an increase in pension income greater than the cost of their contributions but there is not universal agreement on this point.

To my mind it is a pretty poor brand chosen so that they can show an egg shape as their logo. NEST-egg (ouch!) I wonder how much they paid some design agency to come up with that one!

It remains to be seen how successful the NEST scheme will be and there are potential pitfalls for both employers – who will face increased direct and indirect costs – and employees, who will have less take home pay with no certainty that they will be better off when they come to retire.

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