The National Employment Savings Trust needs to ‘earn’ the self-employed market over time, instead of expecting it to uptake automatically post-April 2017, according to Tim Jones, Nest’s chief executive.
Last month, FTAdviser reported that the government has confirmed it intends to remove the annual contribution limit and transfer restrictions on Nest from April 2017.
As a result of these changes the ‘contribution cap’ will be removed for those enrolled in Nest. At the moment, people can only pay £4,500 per year into a Nest scheme, whereas within any other pension arrangement it is £40,000 per year.
However, as of April 2017 that limit will be raised in line with other pension schemes to £40,000. This means the restrictions will be lifted before minimum contributions rise to 5 per cent in October 2017.
Mr Jones said: “Another group that will be influenced by that [the lifting of the restrictions] will be the self-employed. As part of our job, in our statute, is to be available to any self-employed person that wants to use us.”
At present the number of those enrolled into the Nest scheme that are self-employed is over 800.
“The point is that a self-employed person - there’s no concept of an employer contribution - could at the moment put £4,500 a year into Nest, but if you have a spectacular year as a self-employed person, [in] any other pension fund in the land you can put £25,000, £30,000, £40,000.
“You can’t with us yet, but you will be able to from 2017, so that’s another sort of freedom. Apart from us talking about those freedoms I have absolutely no plans at all to change Nest as a product to reflect those new freedoms.
“We are still designed for our target market – we will remain designed for our target market and we will see what happens as people adapt their behaviour to a world where Nest looks pretty much like any other pension plan in the context of workplace pensions.”
Mr Jones expanded on how he expected the lifting of restrictions will impact on the self-employed market.
“I don’t think the lifting of the restrictions is going to have a big impact. I think if they had stayed they might have had a negative impact. In a sense I see the removing of the restrictions as the removing of an inhibitor, not necessarily the creating of a strong positive.
“Am I then saying I don’t think there are strong positives for self-employed using Nest? Absolutely not - I do believe that Nest is something that self-employed folks might well want to use, but I think we are going to have to earn that, Nest is still very new.”
He added that if Nest continues to hit its investment objectives consistently and numbers increase, it will build people’s confidence.
Currently Nest has 1.5m members and around 9,500 employers, with the aim of having 3m to 4m members and “probably more than a quarter of a million” employers of all sizes by 2018 which “will breed familiarity”, added Mr Jones.
“It [self-employed uptake] will grow slowly and it will be very hard to rush it because you could make a big noise and do a massive marketing campaign and say ‘come on self-employed come and join Nest’ but I can’t tell you they would and I can’t waste my members’ money doing a campaign if it doesn’t turn into something that has got a business case.
“What we’ve got to just do our job and gradually we’ll get our place in the market. We’ll become much more known and if we continue to do a good job more and more people will start to say ‘well I use Nest’... and any self-employed person can just come to the website and join.”