Nest Pension Contributions

A question about : Nest Pension Contributions

I just had a meeting with my employer who advised me of new legislation coming in at the end of the year that makes it compulsory for them to provide me with a pension that they contribute 2% of my salary to. Great I thought until I was informed that the company plans to reduce my salary by 2% to cover this cost. Are they allowed to do this? I realise that having a pension is important and I’m all for that, but what is the point in making it compulsory for employers to contribute if they are allowed to simply reduce your salary to cover the cost - surely this is a loophole that allows them to follow the rules but without actually contributing anything at all.

Best answers:

• a reduction like that would require a new contract of employment and would amount to a pay reduction. That is not the intention of the requirements. Now, if everyone agrees to it then the company is fine to do it (like the firms that have seen employees take pay cuts to prevent redundancies). However, I suggest legal advice is needed on this as the company appears to be trying to pull a fast one.
• https://www.dwp.gov.uk/policy/pension...forms/toolkit/
• My understanding was that you can opt out, the work place simply have an obligation to encourage you to take a pension. And if you do opt out, you will be automatically opted in again every 3 years, and you will have the option to opt out again.
  Many work places already do this; automatically opt you in for a pension unless you opt out. Its nothing new, its just that company are going to have to do this, rather than just being encouraged to do so.
• Of the two percent, 1% is supposed to come from the employer and the other 1% from a combination of the employee and tax relief. Is your employer proposing to reduce your salary by the full two percent?
  As of July this year it is against the law for an employer to offer an inducement to encourage an employee to opt out of a pension scheme. One of the examples of cases that appear clear cut (page 9) is given as:
  "The employer tells their jobholders/entitled workers that if they opt out of, or leave, their pension scheme, they will receive any of the following:
  • An extended or renewed contract in the case of a short-term worker
  • A one-off payment
  • A higher salary level
  • A promotion."
  Your employer appears initially to be offering a higher salary level to employees who opt out, thereby acting contrary to the law. Part of the 1% (the part before tax relief) coming from you would be fine and normal. But not the employer portion and the tax relief.
  Is the pension to be the high risk and expensive NEST pension or some other pension? Auto-enrollment doesn't have to use NEST and NEST is the one that I expect to be preferred by employers who are trying to get people to opt out.
• If the employer plans to reduce all salaries by 2% that seems legal if the employees choose to accept the change to their employment contracts. Also stupid. Reducing future pay rises by the same amount for all would annoy people less and be invisible.
• NEST Representative, a couple of questions first:
  1. Does NEST permit transfers out, say to buy an annuity elsewhere or to go into drawdown, and is this possible at any age from 55 while still remaining in NEST for new pension contributions?
  2. At least one parliamentary committee has recommended removing the ban on transferring in to NEST, is it also recommended to remove the ban on transferring out that is the major component in making NEST a high risk option?
  Then some comments on your reply:
  3. NEST is not cheap compared to the best deals available in the market, only to the less good deals. The charges may be better than no pension but employees and their employers should seek the best deal, not settle for NEST. MSE isn't about settling for the less good choices, it's about picking the best.
  4. NEST is a high risk option for employers and employees because once the money is paid in to NEST it cannot be moved to a pension offering a better deal, whether that is on charges or to get a better range of investments. NEST could raise the charges again and people would still be locked in.
  5. NEST's investment options are severely limited and inadequate for those who want to do serious investing for their retirement.
  6. NEST has deliberately chosen to harm the investment returns of younger scheme members by using a low equity mix for the initial years instead of explaining about volatility and educating people to become better investors.
  7. NEST has failed to meet the cost target given by the Reports of the Turner Pensions Commission, the 0.3% total cost that was for example given on page 18 of the Final Report as a reasonable target for members choosing passive index-tracking funds like those offered by NEST.
  All in all, at the moment the NOW: Pensions proposition looks like a better deal for both employers and employees. It has a generally better mixed investment default fund that should do well for those who take no interest, allows transfers out so there is no high risk lock in and plenty of investment choice for those who can use that.
  Because of the high risk and poor investment selection, for the younger age group, there is a substantial chance that at present I will suggest opting out and using a personal pension or S&S ISA instead of accepting a NEST pension. A removal of the ban on transferring out would certainly change that, it's unlikely that the future levels of employer contributions and tax relief will be sufficient to, even though they will be higher than the current ones. A long time locked into sub-optimal investments with higher than necessary charges just isn't worth accepting when there are alternatives available.
  Now: Pensions is of course a competitor to NEST and likely one of many who will see the NEST offering and deliberately offer better terms for employers and employees, just as happened to the Stakeholder Pension standard which advanced the whole market even though the product itself became largely obsolete.
• have to admit i am looking forward to the NEST representative answering those questions, thanks James for asking them
• Dear Gavimoss,
  There is another thread that is very similar to this one. This is a variation of contract, you can verbally accept a variation of contract (it is possible to, so be careful what you agree to in front of potential witnesses). But you must be careful not to push your company into insolvency by industrial action as then you will have no salary.
  It's not the best of situations, and there is no easy solution but check out the other threads here. Unfortunately, we will always have rubbish employers who will attempt to squeeze all they can from their staff - whether they need to or not.
  To Nest sales representative - That's not what OP's question was. This forum is not for sales pitches - I found that out the hard way too!
  Just learn from this error and don't post a wall of text about why your pension is good. I (being an IFA) could find about 3 GPP's that do all that and much more - unfortunately the government didn't force employers to use IFA's and allow the private sector to work, they dished out a load of money to those that spent the most on their pitch.
  How on earth has you copy and pasting your KFD onto this site helped the OP answer their query, shame on you, at least I only put my url on in my sig.
  You are a worker for a company that has won a government contract - well done, now either actually help people or clear off.