UK – Restrictions that limit transfers into and out of the National Employment Savings Trust (NEST) should remain in place until the defined contribution (DC) fund – launched as part of the UK government's introduction of auto-enrolment – becomes self-sustainable, the Work and Pensions select committee has been told.
Invited to discuss issues including pension charges and scheme governance, Steve Groves, chief executive of insurer Partnership, said the restrictions were introduced due to the industry's fear that NEST's state subsidy would affect the market's ability to compete.
He argued that the scheme was created because the pensions industry had not been very good at serving pension savers with "small and even average pots".
Discussing NEST's inability to allow pension pot transfers out of or into the scheme, Groves said: "The restriction was put in there because of the fear of competing with a state-subsidised piece, and, over the medium term, that's a fair fear for an industry to have."
He added that the idea would be to allow NEST "time to build".
"I would remove that restriction," Groves said, "but I would also be looking for NEST to be self-financing around the time the restriction was moved."
Earlier in the committee hearing, chair Dame Anne Begg asked how the Department for Work & Pensions' (DWP) proposed 'pot follows member' policy – whereby certain, smaller pension pots automatically transfer to a new occupational fund when a member changes employers – could function in an environment where NEST was still constrained by a transfer ban.
Richard Parkin, head of workplace and DC savings at Fidelity, did not see the transfer ban as a hurdle to such an approach.
"To the extent that a transfer arose from an automatic transfer, then you'd have to exempt those from the current restrictions," he said.
Ronnie Morgan, strategic insight manager at Scottish Life, added that the restrictions "had to stay" until 2017, when a review of NEST was mandated by law.
He told the committee: "NEST, even just focusing on their target market at the moment, is going to have a significant problem in getting all those people on board.
"With the greatest respect, this is a massive challenge, and they need to remain focused on the target market."
Earlier this year, the parliamentary select committee recommended that all restrictions on NEST be lifted ahead of the 2017 timetable.
The government initially opted against such an approach, arguing it would "not be lawful" due to the state aid granted to the scheme upon launch.
However, the DWP has since launched a call for evidence on the lifting of the restrictions.