Written by Karen Bryan
The National Employment Savings Trust (NEST) workplace pension scheme will start rolling out soon. Many employees will be automatically enrolled, although they can opt out. However, I’m not convinced that the majority of workers enrolled in NEST will be aware that they are paying into a stock market based pension with no guarantees whatsoever on the value of their pension pot at retiral, therefore making it impossible to plan retirement.
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Until recently, many workplace pension schemes had been defined benefit schemes, where the pension you receive is calculated on the basis on the number of years worked, contributions made and age at retiral. With people living for longer and stock market fluctuations, this model of pensions is said to be unsustainable.
The NEST solution appears to be to make the employee take all the risks. I don’t think this is correct. There has to be some middle ground with workers having a minimum pension income guarantee, based on the amount paid into NEST.
What I’d like to know is what steps are being taken to ensure that employees being auto-enrolled in NEST are fully aware of the implications of a stock market pension, to ensure there is no basis for any NEST mis-selling claims in the future.