National Employment Savings Trust (NEST)

The National Employment Savings Trust (NEST) is a new workplace pension scheme that is designed to help people who are largely new to pensions save for their retirement.

It is being introduced as part of workplace pension reforms coming into force in 2012 that will place new legal duties on employers to enrol workers in pension schemes.

NEST will be open to any employer that wants to use it to meet the new legal requirements.

It is a trust-based defined contribution scheme and will be run in members’ interests by NEST Corporation.

It aims to provide people with access to a simple, low-cost pension and the investment approach has been tailored to the needs of low to moderate earners.

The charges are expected to be 1.8 per cent on the value of each contribution (to cover NEST’s start-up costs) and an annual management charge of 0.3 per cent of the value of the fund.

Workers will be automatically enrolled into NEST’s default fund but there is likely to be a choice of investment funds, which may include options such as social, environmental and ethical investments. Anyone who prefers not to make an investment choice, will remain in the default fund.

Membership of NEST is portable so people can continue to save in the scheme even after they leave the workplace or move to a new employer that does not use NEST.

More than one employer can contribute to a member’s NEST pension pot at the same time.

Under the pension reforms, employers will have to automatically enrol eligible workers into a qualifying pension scheme such as NEST and make contributions to it. Workers will be able to opt out of their employer's scheme if they choose.

The self-employed and single person directors will not be automatically enrolled in NEST but will be able to join the scheme.

Transfers in and out of NEST are not allowed except in very limited circumstances. This will be reviewed in 2017.

There will be an annual contribution limit of £4,200 into NEST. This will be uprated by earnings year on year. This limit will be reviewed in 2017.