National Employment Savings Trust (NEST) – 2012 onwards

The National Employment Savings Trust is a national pension saving scheme set up under the Pensions Act 2008. It is intended to provide those without access to a workplace saving scheme, the opportunity to save in a scheme with the low Annual Management Charges previously only available to those in large occupational pension schemes.

It is part of a set of workplace pension reforms that are being phased-in from October 2012. Under these reforms, employers are required to automatically enrol jobholders into a workplace pension scheme and, unless they opt out, make minimum contributions to that scheme.

The target group for NEST is a group that commercial providers had found it difficult to serve profitably, including: low to moderate earners, smaller employers, and employers with a high labour market churn. The Labour Government was concerned to ensure that NEST focused on its target group so that it complemented rather than replacing existing provision. It therefore legislated to place an annual cap on contributions to NEST and to restrict transfers into it. These restrictions were to be reviewed in 2017. The current Government announced in July 2013, that it would lift the restrictions, although not immediately. The contribution cap and the prohibition on bulk transfers are to be removed in 2017. The restriction on individual transfers is to be lifted earlier, when a new mechanism for a person’s pension to move with them when they change jobs is introduced, possibly in 2016.

The background to the scheme is discussed in more detail in Library Note SN 4826 National Employment Savings Trust – background. For more detail of the new duties on employers, see Library Standard Note SN 4787 Pensions: Automatic enrolment and employer contributions.