NEST is basically an automatic opt-in pension that has to be provided by employers unless they have a better option. The idea being simply that people are not saving enough for their retirement and having an opt-in approach simply doesn’t work.

The new scheme is expected to be launched next year, but there are likely to be further changes along the way and not everyone will be effected initially. This is aimed at the low paid with little or no pension provision. The contibutions are capped at £3600 a year (this amount may rise) but at present the plan is not to allow funds to be transferred in or out of NEST except in very limited circumstances. This is presumably due to the complexity of advice and costs involved.

A key part of this is the calculation of “qualifying earnings”. This is currently set at £5,035-£33,540 and includes overtime, bonuses, maternity/paternity leave, commissions and pretty much anything else you can think of relating to an employer paying an employee.

The plan is to start contributions (compulsory) at a low level. Employees will tend to start at 2% with employers paying 1% of qualifying earnings. This is expected to last until someting like 2016-2017 when contributions will increase to 5% for employees and 2% for employers. It is hoped that by 2017 this will rise to 8% from employees and 3% from employers.

Have a look at this pdf document for more basic facts. However, please be warned that much of the anticipated “rules” may alter. It is my understanding that the Coalition Government will press ahead with NEST, but some of the detail and timing could well alter depending on the state of the UK economy.

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