The Conservative Government, in the form of the department for work and pensions, has just issued a call for evidence linked to proposals for the National Employment Savings Trust (Nest), which could lead to a pensions advice monopoly that frankly even Chairman Mao might have envied.
The paper, Evolving for the Future, explores how Nest could expand its pensions remit after automatic enrolment has bedded in. By 2018, Nest will be one of the UK’s largest pension schemes.
With 3.3m-plus members, it will soon be the biggest pension fund in the UK, with billions of investment funds and enormous economic influence and monopolistic power; however, with great power comes great responsibility.
I am not anti-Nest; indeed, I think Nest is fulfilling a vital role in helping meet the needs of employers and its simplicity and ability to accept all relevant employees has helped ensure the success of auto-enrolment.
It would have been impossible for traditional providers to do so as cost-effectively for the lower paid and transient employees, given Nest’s certainty of government funding and freedom from normal commercial pressures.
I think Nest is fulfilling a vital role in helping meet the needs of employersMy issue is with the potential threat contained in the call for evidence. The paper suggests that Nest might expand beyond being a mass-market vehicle for auto-enrolment.
I believe this would amount to nothing less than an attempt to nationalise personal financial advice by the back door. The call for evidence refers to the need for a core strategy to deliver retirement income solutions for large groups of savers. It is individuals who retire, not large groups, and the circumstances and aspirations of individuals differ.
Ten retirees with the same retirement fund will each have different objectives and different dreams; what they need is individual advice.
We have already seen from the ill-fated Money Advice Service, that Government initiatives in this area have been doomed to expensive failure.
The obvious answer is to provide every pensioner with a voucher so they can obtain personal financial advice from wherever they choose, which would increase and support the availability of financial advice for all and go a long way to achieving the key objective of the Financial Advice Market Review (FAMR).
The DWP’s call for evidence is open until the 28 September. I urge you to download – and respond to – the paper:
Ken Davy is chairman of SimplyBiz Group
