The national employment savings trust (Nest) is not intended to replace existing pension schemes such group personal pensions (GPPs), stakeholder schemes and group self-invested personal pensions (Sipps).
Speaking at the first day of the Employee Benefits Pensions Summit 2011, Paul Gilbody, director of market engagement at the Nest Corporation, said that the scheme is also not designed for everybody to use.
“Nest is not designed for everybody,” he explained. “Not every organisation will end up using Nest and quite right too. Nest is designed for a specific population – those who are not currently saving for retirement.
“There is an awful lot of good provision out there at the moment and that will continue. Some employers will just carry on with what they are doing at the moment.
“The vast majority are going to have to make some decisions about what [provision] they are going to put in.”
He added that people are also going to place a greater importance on pensions in the coming years. “In 10, 15, 20 years time, we are going to see pensions become far more important for the average person on the street,” he explained.
How pensions are communicated to employees is also important to ensure that they fully understand them. “When you talk to people around the jargon of pensions, they do not understand it, which can be a barrier,” said Gilbody.
Instead, employers should explain what phrases mean rather than using confusing pensions terms. For example, trivial commutations could be explained as ‘taking your retirement pot as cash’ while the open market option could become ‘shopping around for retirement income’. These are both phrases Nest Corporation has included in its phrasebook.