NEST pensions - your questions answered

Here is what you need to know about the NEST pension scheme and how it could help you save for your retirement.

Pensions are long term investments. You may get back less than you originally paid in because your capital is not guaranteed and charges may apply.

What is NEST?

NEST is a defined contribution occupational pension scheme backed by the government. Both you and your employer contribute to your pension while you are working.

It was set up by the government to give employers an auto enrolment scheme that makes the process as simple as possible.

Here is more information on auto enrolment

How does it work?

Your pension contributions will be deducted via salary sacrifice so you will not pay any tax or National Insurance on the money you contribute.

The money your employer pays into your pension is on top of your salary. This means you end up earning more than you would if you were not a part of the scheme.

When you retire you can use your NEST pension pot to buy an annuity that will give you a retirement income.

How much does it cost?

There are two charges you have to pay:

  • A charge of 1.8% on each new contribution

  • A 0.3% annual management charge (AMC) on the total value of a fund each year

For example, if you pay £2,000 into your pension the contribution charge would be £36.

If the total value of your pension is £25,000 the AMC would be £75. That means the total charge would be £111. Here is a a full breakdown of NEST charges.

To compare the costs of the NEST pension scheme to other personal pensions use our pension comparison table which lists the management fees of all the main pension funds.

How is your money invested?

Any money you pay into a NEST pension will be added to a default fund which can then be invested in a range of different companies, industries and sectors.

The fund your money is paid into is based on your estimated date of retirement. These are called Retirement Date Funds and each one is tailored to maximise your pension for the year you retire.

You can also choose to invest in other funds, including ethical, Sharia Law and high risk funds.

Here is more about how your NEST pension is invested

Can you opt out?

Yes, you can opt out within a month if you decide you do not want to invest in NEST. However, your employer is obliged to enrol you into a pension if you are eligible.

Think carefully if you do not have any other method of saving for your retirement before you opt out.

Speak to a pension broker about the best option for you, or you can find out what type of pension you could get here.

What happens if you change job?

What happens to your NEST pension depends on the scheme your new employer uses:

  • They use NEST: They can enrol you back into NEST. You will receive a form confirming you are already a NEST member which you need to complete and return before your details can be updated.

  • They do not use NEST: You keep your retirement pot with NEST but will not be able to contribute through your new employer. However, you can still make additional contributions through your NEST online account.

Every time you change job or move employers, think about your pension arrangements, especially if your new employer offers a pension plan that can match your contributions above those outlined in the NEST scheme.

Can you transfer money in and out?

Yes, you can transfer your NEST pension out to another scheme, or you can transfer other pensions you have into NEST.

Transfers in

You can transfer existing pensions you have into NEST through your online account. There are no additional fees for transferring other pensions into NEST.

You can also make one off contributions online, and the minimum transfer you can make is £50.

Here is how to transfer your pension pots into NEST

Transfers out

You can only transfer money out to another UK pension, or a recognised overseas scheme. You cannot withdraw money from your pension until you reach 55 years old.

Here is more information on transferring your pension out of NEST

How do you manage your NEST pension?

You can monitor and make changes to your pension by logging on to your NEST account. Through your account you can:

  • Review how much is in your pension pot

  • Make extra contributions to your pension

  • Transfer your pension to another scheme

  • Check your personal details are correct

  • Confirm where you want your money to go if you die

If you are logging into your NEST account for the first time, you will need your National Insurance Number and your NEST ID.

If you want to contact NEST to discuss you pension you can send them a message through your online account. You can find other ways to get in touch with NEST here.

If you want a full review of your pension and all your options, you should speak to a pension expert.

Can you use it if you are Self Employed?

You can still save for retirement using NEST if you work for yourself, although automatic enrolment will not impact self employed workers.

You will still receive the same tax benefits as employed workers but will not be bound by minimum contributions limits, so you will have more flexibility.

However, as no one will be making contributions on your behalf you should consider all your retirement savings options before you sign up.

For more information on using NEST when you are self employed visit the NEST website.

When can you access your NEST fund?

Any money you pay into your NEST pension cannot be accessed until your 55th birthday.

Once you retire you will be able to withdraw 25% of your pension pot as a tax free lump sum. This is the same as with any other personal pension fund.

Whatever you decide to do with your NEST fund you must take all of the money out of the scheme by your 75th birthday.

Here is more information on the different ways you can withdraw from your pension.

You can help ensure you have the retirement you want by finding the best personal pension plan to make your money work as hard as it can.