MPs recommend making NEST pension scheme more attractive
A committee of MPs have recommended making improvements to the National Employment Savings Trust (NEST) to make it more attractive.
The governments pension plans will require companies to automatically enrol employees onto a pension scheme starting in October this year for the biggest employers in the country.
Most employees between the age of 22 and the pension age will be enrolled on a pension scheme if their income is above £7,475 per year. They can however choose to opt out.
The companies can enrol their employees on either their own pension scheme, or the NEST pension scheme which is set up and run by the government.
The NEST scheme places an annual limit on the amount of contributions an individual can make. This is currently set at £4,400 per year and MPs have raised concerns that this could deter some higher paid staff and require the employers to have a second pension scheme.
Another feature which has raised some concern is that employees cannot transfer any savings from previous pension schemes into the NEST scheme.
A spokesperson for NEST indicated that any changes to the scheme should be decided by the government. They also suggested that there was some evidence which indicated that the current limits were having a detrimental effect which could prevent some members having access to the scheme.
A spokesperson for Age UK said: “Lifting the ban on transfers so that small pension pots can be consolidated and removing the cap on annual contributions will make auto-enrolment easier and more cost-effective for millions of people on lower earnings.”
Whilst some experts have recommended that the government make these changes, there have been some concerns over having a large share of the country’s pensions savings held in one place.
The auto enrolment process is due to be phased in from October 2012 and is hoped to be completed by 2017. It is expected that up to 8 million more workers could have a pension scheme as a result.