What in heaven’s name does the headline mean?
I’m 65 and I’m at the end of the road. What’s the map telling me I’m getting as a pension from Nest and L&G?
Katherine Photiou assures me that she’s on the road to getting my trust
I like Katherine Photiou and I like Gavin Perera -Betts but if we are to get back trust in private pensions we are going to need to go a little faster than this.
Photiou added members’ trust in the system will be “undermined” when the system “doesn’t join up” and when the government, industry and regulators “confuse everyone”, as that will “erode trust”.
“You can erode trust with a slow transfer or a confusing statement.“
She concluded that it is “incumbent” on the industry to ensure the reforms laid out in the roadmap are deliverable and Perera-Betts added it is “non-negotiable” for the industry to deliver them. (from Professional Pensions)
I’m sorry but it’s not connecting systems that will make me trust my DC providers. It’s the whole private pension system that’s letting me down.
When this Government talks about getting back trust it is not incompetence in administrating pensions or giving us duff information that’s on their minds. I am frustrated by Nest’s hopeless information delivered to my pension dashboard while I find Legal & General really rather good. But so what? That’s only about my car sitting in the garage! I want to go for a very long drive and I haven’t got a key let alone a roadmap!
It is receiving my wage in retirement that will get back my trust. It is not providers connecting their systems!
What I want from my two DC pots with Nest and L&G is a pension that allows me to plan my retirement and right now, when I go on my Nest and L&G websites there is nothing that tells me what I’m going to get as a pension.
It is not the adequacy, it’s the fact that there’s no way that I can tell how much pension I’m going to get (I’m 65 in 24 days- I would like to know!).
Whether to pull my two pots into one is a “nice to”, what I want is a statement that tells me how I get a pension like the state pension – one that goes up with the cost of living and one that I can take at 65 or leave to 67 (and get a bit more for waiting). I want to know that my common law wife can get a pension if I die (I nearly did) and I want to know whether I can swap some pension for tax free cash and the impact of doing so on my income.
None of these very simple questions is answered on my Nest or L&G page of their website.
My experience isn’t unique. The vast majority of people who have put away a proportion of their salary and bonus for retirement, have done so to get a regular income that protects them from a rise in the cost of living. When I get paper statements from L&G and Nest they do offer me a Statutory Money Purchase Illustration but you have to be on the inside to know that there’s no cost of living protection nor a pension quoted for the wife. It’s the amount of income I can get from an annuity (sort of) but it’s a level annuity.
So here’s my message to Gavin and Katherine. What I want is the stuff on the right hand side of this slide not the left hand side.
I don’t want a roadmap that takes me through little villages , I want a motorway to the big town. What conversations between yourselves about small pots, consolidation, pot valuations and your idea of VFM mean nothing to ordinary people. Ordinary people want a simple way of knowing what they’re going to get from January to June and June to December for however many of them they’ve got to live.
This is not about me finding I haven’t paid enough into the pot, I want to trust a system that now I’m 65 makes sense. I can’t and that pi*@es me off.
Pretty much the same as in the states, no?
If you don’t work for an employer who sponsors a defined benefit or defined contribution pension plan, you are on your own to save, and to convert your “pot” into a “pension” via an annuity purchase, right?
Even if you do work for such an employer today, no one guarantees that the employer will still be around in 10, 20, 30 or more years, or that they will continue to maintain that plan?
Even if they are still around in 10, 20, 30 or more years when you reach age 65, less than a third of workers (at least in the states) remain with any employer for more than 10 years.
Last I heard, no one in the states guarantees future interest rates for converting a pot to an income stream, and, no one guarantees an inflation-indexed income in retirement.
Do UK pension plans, DB and DC, include a requirement similar to the one we have in the states that the benefit must be paid in the form of a single life annuity (50% Contingent Annuity if married) unless the participant opts out (with spousal consent as necessary)?
Like in the states with Individual Retirement Accounts, don’t those who want to annuitize a UK Nest pension pot have to transfer the pot to an external provider to buy an annuity or use Nest’s partnered and default decumulation options (in the states, we call that the Required Minimum Distribution, where there is a 50% excise tax penalty (forfeiture) to the extent you fail to follow the rules).
There are a lot of people in the states who, for a fee, will guide you in your preparation for retirement – so that when you get to age 65 and you find out you haven’t contributed enough, you’ll know who to blame. I’m confident such people are available in the UK as well.
Perhaps a significant difference with the states is if you retire prior to age 70, you can defer commencement of Social Security to “buy” a known, additional amount, guaranteed, inflation-indexed income using the “pool” of a couple hundred million workers, active, unemployed and retired (in 2025, about 255 million people either contributed and/or received a benefit from Social Security). However, last I heard, one funding “solution” our beltway folks are considering is a 20% – 25% reduction in benefits – and no one knows how they will apply that.
Still, that’s no guarantee what you saved to buy this Social Security “annuity” and other streams of guaranteed income will insure (not ensure) be enough by the time you reach age 65.
You posed some specific UK questions.
Do UK DB and DC plans require an annuity by default, with spousal consent to opt out?
No. That description is much closer to certain US qualified-plan rules. UK occupational schemes do not have a general legal default requiring a single-life or 50% joint-life annuity unless the member opts out with spousal consent.
DB schemes pay scheme-defined pensions, often including survivor benefits; DC members choose among annuity, drawdown, lump sums, or combinations.
Must a NEST saver transfer out to buy an annuity or use NEST’s decumulation options?
Partly right. NEST does not itself sell annuities or offer flexi-access drawdown. A NEST member can buy an annuity from an external provider, transfer to another provider for drawdown, or use NEST’s UFPLS route to take lump sums directly from the pot. NEST does not charge for the transfer or annuity-purchase route.
Is the UK’s NEST equivalent to US RMDs?
No. US RMDs compel minimum annual withdrawals after a specified age, with a punitive excise tax for shortfall, although the penalty has been reduced from 50% to 25%, and to 10% if corrected timely?
The UK has no equivalent general compulsory withdrawal regime for DC pensions; the 2015 “reforms” removed most restrictions on how much or how little can be drawn.
Does the UK have an equivalent of deferring Social Security for a larger inflation-indexed annuity?
Not in the same voluntary-deferral form. The UK State Pension is based on National Insurance contributions/credits, not on choosing a later claiming age in exchange for a higher lifelong benefit. You can,however, defer your State Pension commencement and all State Pensions are inflation-linked through the triple lock until 2030, which is a major structural difference from a purely private DC pot.
Your core concern is sound: neither country guarantees that private DC savings will be sufficient, and both systems have shifted longevity, market and inflation risks substantially onto individuals.
UK auto-enrolment minimums are low, and NEST-style pots may be small if contributions remain at the statutory floor.
But you are wrong to think the UK is essentially the same as the US.
The UK has:
• universal auto-enrolment for eligible workers, rather than reliance on an employer voluntarily sponsoring a plan;
• no compulsory annuitisation at 75 and no US-style RMD penalty regime;
• a broader set of decumulation choices, including leaving the pot untouched;
• a statutory DB backstop through the PPF; and
• a State Pension with explicit inflation/earnings-linked uprating, albeit subject to longer-run fiscal and political risk.
The strongest version of your argument may therefore be not “the UK is the same as the US”, but rather the UK has a more supportive institutional floor, yet its DC system still leaves many savers exposed to inadequate contributions, poor decumulation choices, and longevity/inflation risks.
Thanks.
“… Your core concern is sound: neither country guarantees that private DC savings will be sufficient, and both systems have shifted longevity, market and inflation risks substantially onto individuals. …”
Yes, there are differences, but, by and large, in response to Henry’s #1 concern that the system doesn’t guarantee an adequate income in retirement, both countries have voluntary systems above a base income replacement from the state, where, even if defaults apply, there are no guarantees of an adequate income in retirement.
In terms of differences, you mentioned that the UK has:
Agree that: The UK has a more supportive institutional floor, yet both the US and UK systems leave many savers exposed to inadequate contributions, poor decumulation choices, and longevity/inflation risks.