By Lois Avery
Pension savers should be wary of the NEST scheme according to Saga who is calling on the government for more clarity about the auto enrolment programme.
NEST is the government proposal for compulsory automatic enrolment of all workers into a workplace pension scheme and is due to roll out in 2012.
Saga says they have ‘serious reservations’ about the way auto-enrolment will work and about the introduction of the NEST - National Employment Savings Trust - scheme.
It will mean smaller companies that do not currently offer a pension scheme have to enrol staff on to NEST affecting with workers earning more than £7,000 tobe automatically enrolled.
But pension policy advisor and the new director general of Saga, Dr Ros Altman is warning employees that NEST might not offer a good deal for everyone’s pension savings.
She says people should be aware of the charges involved, and suggests that for some savers an ISA might be a better option.
“We believe that the decision to levy an initial charge of 2 per cent on NEST pension contributions is unwise and unfair. It is essential that the government issues proper information to explain the problems of this charging structure and help workers understand.”
She has also called on the government to offer savers proper risk warnings before being enrolled.
“We are concerned that pensions may not be suitable for many of those automatically enrolled. Some low income workers, especially those with large debts or who are very young, may not be best advised saving in a pension, but who will warn them of those risks.”
Younger and lower earners could also be at a disadvantage on the NEST scheme, according to Dr Altman.
“These workers might be better off saving in an ISA, rather than a pension, or using the money they set aside to pay back debt, rather than locking it away for many years or decades into a pension. We would prefer to see the government introduce a national savings scheme, not just a national pensions scheme.”
