NEST pension - should I stay in?

Discussion in 'education & employment' started by Mr Smin, Jul 14, 2013.

  1. Mr Smin

    Mr Smin Registered Luser

    I've been auto enrolled into a NEST pension scheme. It looks pointless as the contributions from me and my employer are much smaller % than the pension scheme I was in at a previous job, so the end result is likely to be a tiny pension and the government clapping themselves on the back because everybody's old age is sorted.

    Here's the link
    http://www.nestpensions.org.uk
    and if you are employed but not in a scheme, there's a good chance this will be offered to you soon.

    I'm much more inclined to put any spare cash in an ISA. Even without employer's contribution and income tax relief, it seems a better option.
     
  2. Maurice Picarda

    Maurice Picarda Actually, might as well flounce.

    You'd want to put the cash in something fruitier than an ISA if it was ever going to be worth forgoing employer contribution and tax relief. Bitcoins, perhaps, or leveraged pork belly futures. Stick with the NEST if I was you.
     
  3. Manter

    Manter Lunch Mob

    Employer contributions are never a bad thing, surely? And it's not accessible on a pension, and taken at source, so you can't be tempted to miss contributions because you're going through a lean patch. If you can do an ISA too, all well and good, bit I do think everyone should take advantage of pensions. Having had a better pension in the past is only relevant for your transfer value- you shouldn't take that pension and convert it to the new one. But ongoing saving in a pension is well worth doing- and you can potentially transfer this one if you end up in a better scheme later on, with no tax issues

    Incidentally, the modelling of auto enrolment used to get them agreed assumed large drop outs, but most people are staying in and upping their contribution %) so it is costing companies way more than they expected, and may turn out to be a positive development for saving levels.
     
    Maurice Picarda likes this.
  4. Puddy_Tat

    Puddy_Tat meh

    :hmm:

    a cash ISA might at the moment get you 2 or 3 % interest.

    Is that seriously going to be better than the tax relief and employer's contribution?
     
    muscovyduck and Manter like this.
  5. Mr Smin

    Mr Smin Registered Luser

    No, I'm just resistant to locking money away, particularly in a scheme where the rules can be changed by the government.
     
  6. Maurice Picarda

    Maurice Picarda Actually, might as well flounce.

    Money is "a scheme where the rules can be changed by the government".
     
  7. Manter

    Manter Lunch Mob

    ISAs can have the rules changed at a moment's notice! And if you pull your money out you'll lose the tax breaks, so you may as well keep it under the mattress
     
  8. pseudonarcissus

    pseudonarcissus fluttering and dancing

    Ideally you'd do both, minimum 15% in the pension and any extra in an ISA for retirement/emergencies.

    I'm not sure U75 is the place for dispassionate retirement savings advice as a lot of people are adamant the state will have to provide for them. A nice idea but unlikely to lead to anything but marginal poverty in old age, alas.
     
    Manter likes this.
  9. fractionMan

    fractionMan Custom Title


    What is your contribution % & what is the employers?

    Given the tax relief on contributions and the free money from the employers I can't see how an ISA could compete for value.
     
  10. Mr Smin

    Mr Smin Registered Luser


    Min contributions are presently 0.8% from me, 1% from employer, by 2018 this will be min 4% from me and 3% from employer. I could put more in and I can't tell from the booklet if this obliges the employer to proportionately 'match up'. There are some small charges on this.
    I don't expect the ISA to grow faster, I just like the fact that I still control the money and can move it if I want to.
    The NEST seems like another one-way bet for the supplier while leaving me with risk and no control.
     
  11. Manter

    Manter Lunch Mob

    Putting aside paranoia for a moment, think about why auto enrollment has been introduced. We have a pension funding crisis, and the idea is to take advantage of people's inertia to get them saving, rather than trying to overcome inertia to try and get them to sign up. The government wants people to have some money to live on in their old age, so less of the burden falls on the state. Pensions are *supposed* to leave you with no control of the money- you're not supposed to be able to get hold of it and spend it on things you think you urgently need at the time (university fees, school shoes, new car)- its locked away from you until you're retired. The employer contributions and tax incentives are essentially incentives for you to allow that money to be locked away- and the return on your investment is usually better too over the course of your working life as pension funds can look at long term investments.

    If you truly believe its all a conspiracy, stick some money you can afford to lose in an ISA and shove the rest under a mattress: but missing out on 5.2% of your income in pretty secure savings preparing for your future is, frankly, crackers
     
  12. fractionMan

    fractionMan Custom Title

    You need to find out how the matching increases with you own contributions. Even if its only 5% that's 5% free money.
     
  13. Badgers

    Badgers Mr Big Shrimp!

    Have set mine up today. Pretty good website I thought.

    I have virtually nothing going in at the moment but no harm in having it as employer is paying in too.
     
  14. ChrisEdwards

    ChrisEdwards New Member

    I don't think putting cash in an ISA is the best option there is other option too for this and you can get a solution for it also.
     
  15. bi0boy

    bi0boy Power User

    In HRL perhaps?
     
  16. ska invita

    ska invita back on the other side

    BTW go into your profile and you can switch from NEST to NEST Ethical, which at least doesnt invest in the arms trade. Not the most ethical pension scheme out there - I'm guessing a big amount of money raised by NEST and NEST Ethical is made from flipping houses and pumping up the housing bubble - but at least its a bit more ethical than standard NEST.

    That said, the whole business of these new forced pensions makes me cringe...its a roll out of stakeholder society...I would never choose to take part in the stock market, nor in property investment, so Im annoyed at doing so here. Im currently trying to encourage my employer to move to AEGON, which seemed to be the most ethical I could find Ethical buying guide to Pensions, from Ethical Consumer
    yet its still utter shit, with holdings in Mosanto, Apple and Walmart
    The whole thing makes my blood boil...not sure wether to just opt out of all of it
     
  17. ska invita

    ska invita back on the other side

  18. alex_

    alex_ Well-Known Member

    It comes out of your salary before tax so it costs you 20 to 65 % less than if you were putting into an isa, it's almost certain to have a better rate of return than an isa in the very long term and you contribs will go up in line with your salary - it's win win win.
     
  19. ska invita

    ska invita back on the other side

    for estate agents, arms dealers and big corporations
     
  20. alex_

    alex_ Well-Known Member

    If they win you win.
     
  21. bi0boy

    bi0boy Power User

    Where do you think some of the taxes come from that will pay your state pension? It's really no different to that. Forgoing your employer contribution because capitalism is something you should think about very carefully.
     
  22. ska invita

    ska invita back on the other side

    I know that... It's still shit
     
  23. ska invita

    ska invita back on the other side

    we all lose
     
  24. Mr Smin

    Mr Smin Registered Luser

    One hell of a bump from 2003! Today a smack in the mouth has a better rate of return than most ISAs. I have since changed employers and I'm now in a pension scheme that's got a meaningful percentage coming from me and from the employer.
     
  25. bi0boy

    bi0boy Power User

    Anyone can save for their own pension instead of or in addition to a workplace pension. Obviously doing your own one would mean no employer contributions but you can still get the tax benefits by using a SIPP (you get a 20% or 40% added to everything you put in) or ISAs (tax free income when you take it out) or a combination of the two.
     
  26. moochedit

    moochedit Mr Mooched It

    My employer is starting an auto enrolment pension scheme in july this year(for some reason in the rules they have been able to put it off until then).
    We were told that we could pay in more than the minimum employee %age (if we want to), but that they would still only contribute the same amount (i.e. the minimum %age of our wages they have to pay into it).
    I think we would still get extra tax relief from the goverment though if we increase it.
    We are not with "NEST" though, think they are called "Peoples Pension" IIRC.

    You can opt-out but I think i will stay in it, although i may change my mind.
     
  27. moochedit

    moochedit Mr Mooched It

    Yeah, I have one with prudential that i started years ago, but i kept stopping and restarting the payments when i'm skint, so i don't think it will be worth much in the end.
    No employer payments into it either.
    Actually, I must find out if i can transfer it into the work one as i think you can do that.
     
  28. fractionMan

    fractionMan Custom Title

    Yeah it really depends. My current employer has managed to put it off too and isn't going to match contributions past 5% and I had to fight for the 5%, they were offering 2% :confused:
     
  29. moochedit

    moochedit Mr Mooched It

    yeah, mine won't pay in any more than they legally have to. They went bust about 3 years ago because of an old final salary pension scheme they couldn't afford and then they restarted up as a "pheonix company" to get out of the debts. (dodgy i know but it is legal to do that apparently). I was one of the lucky ones that got my job back after a few weeks. I was never a member of the old pension scheme as it closed to new staff before i joined them.
     
  30. alex_

    alex_ Well-Known Member

    Yes you get tax relief at your highest marginal rate on upto 40k of contributions per year.

    This is why pensions saving is so recommended, because you have to pay tax on anything you put in your isa, not so your pension.

    Alex
     

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