The National Employment Savings Trust (Nest) is to dramatically alter its remit with a stack of new retirement products in a one-size-fits-all scheme.
The plans, announced as part of the Department for Work and Pensions’ 12-week consultation on the evolution of Nest, seek to extend the scheme’s services to people who are not members, and to offer access to a wider variety of flexible decumulation products, such as drawdown.
Nest’s foray into the market will use taxpayer funds to undercut private pension provider rates – a move that is causing concern in the pensions market. Kate Smith, head of pensions at Aegon, believes that Nest’s plans could lead to more “vanilla” propositions and “less innovation” among providers.
Adding that she supports Nest’s move to offer full decumulation services to its members, Ms Smith said, “There is a risk that the public will believe that the government-backed solution must be the best, and that probably won’t be the case.”
Elsewhere, Jon Greer, pensions technical expert at Old Mutual Wealth, suggests that competition, when driven by a good customer outcome, is positive.
“It is a large pension scheme. You have got quite a few people who are going to be auto-enrolled into Nest, so you would expect it to be able to offer the flexibilities that are available to members of other qualifying schemes,” he said.
On the same day of the announcement of its structural overhaul, it was revealed that Nest had added to its £400m debt to the DWP with a loan of more than £70m in the 2015/16 tax year.
Speaking of Nest’s growing debt, as well as about uncertainty in the market following the pension freedoms, Ms Smith added,
“I know the austerity campaign has been put in a box for now, but you do wonder whether this is the right way to spend scarce government resources.”
The consultation closes on 28 September and is currently open to responses.
