The introduction of the National Employment Savings Trust (NEST) in the United Kingdom has helped reverse a decline in pension membership, but an article notes that challenges still remain.
The article—”Pension Reform in the United Kingdom: The Unfolding NEST Story” from the spring 2014 edition of the Rotman International Journal of Pension Management—notes that the historic decline in occupational pension membership has turned, and, should this trend continue, there will be “significant growth over the rest of the decade.”
Also, there’s been an overhaul and simplification of the state pension, a revised regulatory framework and a burgeoning debate on quality standards in plan design and governance.
However, there are still challenges.
There are still hundreds of thousands of smaller employers without a pension plan that haven’t enrolled their staff in NEST.
“The logistics involved in making this happen are, frankly, daunting, and it will take a massive effort from all in the industry to ensure that the rest of the rollout runs as smoothly as possible,” the authors, Will Sandbrook and Tim Gosling, write.
Also, the opt-out rates have been low—just 9% have done so—but the reason for this may be due to contributions starting out at just 2% of earnings. However, the contribution level will gradually rise to 8% of earnings.
“Nevertheless,” they conclude, “we have grounds for cautious optimism and are looking forward to the challenges of 2014 and beyond.”
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