A government proposal to extend the National Employment Savings Trust’s (Nest) remit to include the provision of an unadvised default drawdown service is likely to be met with fierce industry opposition, with some going so far as to say it would be illegal under European law.
In early July, the Department for Work and Pensions (DWP) launched a 12-week consultation period, in which it proposed extending Nest’s remit to allow it to offer “a range of decumulation services for its members”.
Nest had already begun to draw up plans for a comprehensive range of retirement products, including plans for default lump sum, drawdown and guaranteed income funds.
Product providers and financial advisers have opposed the proposal, on the grounds it would be anti-competitive for a government-backed provider to enter a functioning market.
Chris Hannant, director general of the Association of Professional Financial Advisers, said there was “a strong chance” it would be against the EU’s state aid rules, while Kate Smith, head of pensions at Aegon UK, said the proposal was anti-competitive.
Andrew Pennie, marketing director at Intelligent Pensions, said his firm was “largely against the Nest proposal”, saying resources could “be better spent elsewhere”.
Peter Walker, chief operating officer at auto-enrolment provider Smart Pension, said Nest was created “to do the things the market cannot or will not do”.
He continued: “Nest is not there to provide government-subsidised competition to the market. The market provides these [drawdown] services pretty well.” For that reason, he said there was no reason for Nest to enter the drawdown market.
Nest chief executive Helen Dean said the government set up Nest to “help millions of workers achieve a good level of retirement”. She said the call for evidence “explores how Nest might adapt to those changes”.
A DWP spokesperson encouraged “everyone to submit their views, including pensions providers”.
james.fernyhough@ft.com
