The Government is set to lift the ban on transfers into the Nest pension scheme, meaning that over four million pension savers will be able to consolidate their pots.
Nest, or the National Employment Savings Trust, is the Government-backed pension provider used by millions of workers who have been automatically enrolled into a pension scheme.
It was set up in 2012 when the Government launched auto-enrolment for pensions. Nest is there as a pension provider of last resort that employers and employees can use if their workplace doesn’t offer a pension scheme with any other provider.
After five years of auto-enrolment, Nest now has almost 300,000 employers signed up and 4.5 million people paying into pensions with them.
What’s changing?
Up until now anyone with a Nest pension wasn’t able to transfer any other pension pots they had to Nest due to EU rules. State aid rules blocked members from being able to consolidate their pension savings in Nest.
That block is about to expire.
From 1 April, Nest members will be able to move any other Defined Contribution pensions they have worth more than £50 into Nest (Defined Benefit schemes are still not accpeted).
To add to the good news, the pensions minister Richard Harrington has hinted that transferring fees will also be waived.
There is normally a 1.8% charge on contributions into Nest, but this wouldn’t be applied to transferred funds. The annual 0.3% fee would be applied though.
Why should I transfer my savings?
Moving all your pension savings into one pot can make sense as it makes it easier to keep track of your retirement savings and ensures you are saving enough for retirement. It could also result in a smaller amount of your pension disappearing in fees.
“Consolidation of pensions is vital to ensuring people get to retirement with enough income,” says Tom McPhail, head of retirement policy at Hargreaves Lansdown.
“From 1 April, existing members can log into their account and download a pre-populated form from our website to send to their other pension provider to complete,” says a Nest spokesperson.
“A dashboard on Nest’s website tracks the progress of the transfer once the member has sent the form back to us. Once we get all the information and money back from the other scheme then we will process the transfer in three working days.”
Before you transfer though, make sure you understand the small print on your current pensions. Check that you won’t be hit with hefty penalties if you transfer out, and that you won’t miss out on valuable benefits such as a guaranteed annuity rate.
Consider putting your savings into a self-invested personal pension (SIPP). Get started with loveMONEY today (capital at risk)