A flagship scheme aimed at persuading millions of low paid employees to consider their life after work and save for retirement has recently come under fire after the government revealed that all contributions would be subject to a 2 percent fee.
The new fund, set up by the National Employment Savings Trust, could end up becoming an expensive way of saving for some people due to the upfront charges that may lead to reduced retirement savings. As a result this may have a detrimental effect on future investment planning and deter individuals from saving rather than encourage them.
Despite the reservations put forward by financial advisors, between three million and six million people are expected to join ‘Nest’ as the Government plans to force all employers to enrol employees in a workplace savings scheme from 2012.
Nest will be the default option for any employer unable to offer employees alternative retirement saving schemes. So far however, the Government has refused to pay for any of the start-up costs and is instead offering a loan to the scheme. The initial 2 percent fee would help repay the loan and once the loan is paid in full, Nest will drop any further fees.
Financial analysts have been quick to criticise the new pension proposition by arguing that many of the low earners that the scheme is targeted at, will risk losing future benefits should they join. Further criticism is drawn from the fact that employers with in-house pension schemes may choose to downgrade their own financial terms to the level set by Nest.
For further advice on retirement planning or investment advice in general, please don’t hesitate to contact us on 0114 272 3994 to speak to one of our financial advisors.
Tags: Investment Planning, pension schemes, Retirement Planning