Shadow pensions minister Gregg McClymont has urged the government to lift the restrictions on the National Employments Savings Trust as soon as possible to enable it to compete on a level playing field with other big providers.
In September this year, the government confirmed it intends to remove Nest’s annual contribution limit and bulk transfer restrictions from 2017.
Speaking today (9 December) at a Westminster seminar on the future of the pensions market, Mr McClymont, Labour MP for Cumbernauld, Kilsyth and Kirkintilloch East, said: “I argued three years ago now that the Nest restrictions could be lifted immediately...and of course nearly three years later the government has come round to that view.
“But those restrictions need to be lifted and lifted as fast as possible and the reason for that is very simple.
“Nest has done a very, very important job alongside The People’s Pension and Now: Pensions and others in driving quality upwards and cost downwards in the first phase of auto-enrolment but for Nest to continue to play that role it must be able to compete on a level playing field with the big providers.”
In 2013, a pensions committee of MPs demanded the government remove the cap on annual contributions and the ban on transfers in and out of the Nest “as a matter of urgency”.
At the time, pensions expert Ros Altmann said that without any changes, Nest “can’t thrive and taxpayers will have to pay nearly £400m in state aid to Nest, while private providers cherry-pick the best workers”.
Mr McClymont said today that if the restrictions are kept on Nest it will make it more difficult for the organisation to get rid of its debt.
Responding to a question from Henry Tapper, founder of auto-enrolment service Pensions PlayPen, on whether Nest’s £400m debt would be written off or if there was another way to give the money back, Mr McClymont said “We haven’t made our mind up around what we’d do on that issue.”
“I’ve always been supportive of Nest and the reason for that as suggested is because it has worked very successfully as a government intervention to restructure the market place as opposed to government constantly intervening in the market place.
“I think Nest has worked very well on that basis and everything should be done to ensure that Nest continues to play that role as we go down through the staging dates of auto-enrolment.”
Elsewhere, Mr McClymont said that the government’s approach to small pots “has very little support out there in the pensions world”. This follows Mr Webb’s announcement this morning that ‘pot follows member’ will go live in October 2016.
Mr McClymont was critical of the government’s progress with the ‘pot follows member’ system, saying that so far just the legislation has been put in place to say automatic transfers are possible.
“It seems to me that the government is a long way from having credibility on a small pot solution which is basically pot follows member.”
Mr McClymont added that the Labour party would “make a virtue” out of a problem with small pots by encouraging aggregator schemes in the market which would be certified by the regulator as eligible to bid for stranded pots of business.
“We would put in place a series of quality criteria which schemes that want to be eligible for aggregator status would have to meet – these would be a variety of quality criteria around good governance but in particular a charge cap of lower 75 basis points.
“That would be specifically for aggregator schemes because we recognise that getting down below 75 basis points is not something at this stage which every pension provider can meet because there are pension providers that simply aren’t efficient enough.”
He added that not only would the Labour party encourage consolidation in this context, but alongside this they would give The Pensions Regulator the power to force consolidation if the regulator concludes that schemes are too small to get value for money.
ruth.gillbe@ft.com