Brussels, 07/07/2010 (Agence Europe) - The European Commission decided on Tuesday 6 July to approve the establishment of an occupational pension scheme, named NEST, in the UK to ensure that all employees have access to an affordable pension system. The scheme, part of a wider pensions' reform in the UK, is meant for low to moderate income earners whom the existing market does not serve. The Commission found the measure to be compatible with EU state aid rules, because NEST carries out a service of general economic interest (SGEI) and receives no overcompensation for providing it. The anticipated number of members joining NEST is estimated to be between three and six million working people.
“Public services play a key role in Europe's model of society. The new occupational pension scheme will enhance the UK pension system, thereby making sure people, and their employers, provide adequately for old age, without unduly distorting competition in the marketplace,” said Competition Policy Commissioner Joaquín Almunia.
The European Commission has, then, cleared the creation of the National Employment Savings Trust (NEST), a UK vehicle that will manage an occupational pension scheme mainly targeted at employees earning low to moderate income. Under UK pension reforms, from 2012 employers are under a duty to automatically enrol all eligible workers into a qualifying pension vehicle and pay a minimum employer contribution of 3%. The Commission was notified of the scheme because of a loan granted by the government to fill the funding gap faced during NEST's early years of operation.
NEST will be funded by pension contributions, managed commercially and operated on the principle of capitalisation. It will operate at nil overall cost to taxpayers. However, in order to cover the start-up expenses until the scheme becomes self-financing, NEST will borrow funds from the government. The loans will be refunded and the payback period is estimated to be in the region of 20 years. (O.L./transl.rt)