Stakeholder Pension and NEST

Stakeholder Pensions

In April 2001, the government introduced a new type of pension scheme called the stakeholder pension. Such pensions were lower cost than the pensions of the previous era and they had an inherent flexibility such that they can be moved around without penalties.

Stakeholder pensions were originally aimed at those with moderate earnings. Those who are not earning are able to pay up to £3,600 per annum into them and, for those who are earning, the limits are the same as for personal and occupational pensions such that they can currently pay in up to £255,000 per annum provided the money comes from employment or self-employment.

Until 1 October 2012, a UK employer employing five or more employees was required to designate a stakeholder pension plan for its employees if the employer did not provide an occupational pension scheme. The employer had to make arrangements for contributions to be deducted from employees’ pay but was not obliged to make contributions to the scheme itself.  However, this requirement was repealed from 1 October 2012 and has now been replaced by the new duties to automatically enrol eligible workers in a qualifying pension scheme (see section 7).

NEST Pensions

The National Employment Savings Trust (NEST) is the trustee body that runs the NEST pension scheme which is a qualifying pension scheme for the purposes of auto-enrolment. It is a non-departmental public body that operates at arm’s length from government and is accountable to Parliament through the Department for Work and Pensions (DWP).

NEST is open to both savers and employers or the self-employed and all contributors can follow the progress of their pension online.  With employers now having to auto enrol employees into an occupational pensions scheme (see auto enrolment in section 7-Payroll), the NEST scheme represents a straightforward solution for employers looking to ensure they comply with the auto-enrolment regulations.  However, for employers who are willing to shop around there are a large number of pension providers out there offering more attractive qualifying schemes.

For further information about NEST, see the website at the following link:-