Proposed NEST expansion branded “mission creep”

A pensions firm says there is a “serious sense of mission creep” about the Government proposals launched today to expand Nest. The Pensions Minister Baroness Ros Altmann opened a review of the scheme this morning into whether its remit should be widened.The Government is considering whether NEST should offer a more comprehensive retirement service, to reflect the shift in consumer needs following the launch of the freedoms in 2015.A call for evidence has been set up, asking the industry if NEST should be able to develop and offer a full range of decumulation services for its members.AJ Bell senior analyst Tom Selby said: “There is a serious sense of mission creep about the Government’s proposals to expand Nest into a new state-backed open market individual pension provider in an already competitive market.“Nest was set up to deal with a clear market failure in the pensions accumulation phase - namely that the insurance industry was unwilling or unable to serve the automatic enrolment market, and particularly those with small pots.“While it would be good for existing Nest members to have access to a drawdown solution in the wake of the pension freedoms, it is questionable whether there is a market need for a wholesale state-backed individual pension and drawdown provider.”The Government has asked what would be the impact on individuals, employers, NEST and other pension providers of this approach and if access to NEST should be more flexible. What would be the impact on individuals, employers, NEST and other pension providers of this approach?Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “Some of NEST’s competitors may complain that any extension of the scheme’s remit is in contravention of European State Aid restrictions which prohibit publicly funded services (such as NEST) from competing against commercial operations, where an effective market already exists.“In auto-enrolment, NEST was needed because it was essential that all employers had access to a pension provider to allow them to fulfil their statutory duties. By contrast, offering a drawdown scheme to members is not a statutory duty, however the alternative, to not offer the members a drawdown scheme would mean effectively only half the job had been done.“It is illogical and inappropriate to take them all the way to retirement and then abandon them without a decent range of retirement income options.”

Proposed NEST expansion branded “mission creep”

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