NEST raises concerns over DWP solution for small pension pots
UK - The National Employment Savings Trust (NEST) has raised concerns about proposals to allow for pension pots to follow members between employers, saying it was not the auto-enrolment scheme's preferred solution.
Speaking after pensions minister Steve Webb unveiled the UK government's response to the small pot problem - with the Department for Work and Pensions (DWP) endorsing the 'pot follows member' approach rather than appointing one or several aggregator schemes to consolidate savings - NEST's managing director for scheme development Helen Dean nonetheless said the fund would support the reform proposals.
"Whilst the solution proposed in the government's response is not the one that NEST preferred, we will work with government and industry to ensure that, as the development and implementation of the solution progresses, it delivers outcomes in the best interests of our members," she said.
"Clearly, for NEST to participate in such a solution will require the government to review the restrictions on transfers into and out of NEST."
Dean highlighted a report by the Work and Pensions parliamentary select committee arguing for the transfer ban and annual contribution cap imposed on the scheme to be lifted.
While Dean said she understood the government was considering the evidence, an official response published in late May argued it would be "unlawful" to remove the restrictions and pointed out that evidence to the select committee had not universally called for the restrictions to be lifted.
NEST received support from consultancy KPMG, which insisted that consultation responses would have shown that support for the aggregator approach was "widespread".
According to its head of defined contribution (DC) pensions Gurmukh Hayre, the consultancy believed the DWP was heading down the "wrong route" by pursuing 'pot follows member'.
"It would appear that the only winners will be the pension providers who will continue to see members' pots moving around the market and charges being incurred each time," Hayre said.
"Surely, even a restricted number of aggregator schemes would be more efficient?"
The National Association of Pension Funds in the past has spoken in favour of aggregator schemes, saying the system instead should encourage competition between rival super trusts.
The organisation's chief executive Joanne Segars earlier this week said the 'pot follows member' approach amounted to a pensions "lottery", with members at risk of being automatically transferred into schemes with worse governance and higher costs.