Rival master trusts to the UK’s National Employment Savings Trust (NEST) have questioned the legitimacy of a government consultation on lifting its transfer and contribution restrictions.
The government is currently consulting on whether changes made to the legal order on the creation of NEST would be suitable for the removal of restrictions by April 2017.
Master trusts Now Pensions and People’s Pension said the consultation was irrelevant and that wider questions should be asked over the impact.
NEST has a public-service order to accept all employers auto-enrolling employees under their legal obligation.
NEST Corporation, the trust’s corporate sponsor, was created with a loan from the Department for Work & Pensions (DWP), and also received grants while auto-enrolment was still in relative infancy.
The European Commission (EC) forced restrictions limiting members from transferring funds from other pension providers or contributing more than £4,500 (€5,710) a year, as NEST rivals private sector providers.
In the summer, the EC agreed restrictions could be lifted in 2017 after an appeal from the UK government.
However, Danish provider Now Pensions, part of ATP, said it continued to have concerns over the lifting of the restrictions.
It also said it was unclear why this consultation was relevant.
“The consultation question itself does not canvas opinion on the merits or otherwise of lifting the restrictions,” it said.
“Instead, it is phrased from a legal perspective on the premise that the lifting of restrictions will, indeed, take place.”
It also had concerns with the independence of the NEST team inside the DWP from the auto-enrolment team, with concerns that wider policy issues were being made with NEST’s commercial interests at heart.
The company reiterated its desire to operate with a level playing field and berated NEST for its government funding and differing governance requirements as it chose to opt-out of a voluntary master-trust governance code.
The People’s Pension, a master-trust service by not-for-profit firm B&CE, said there were fundamental questions on the market impact of lifting restrictions that the government had yet to answer.
NEST currently charges 1.8% on upfront contributions and an annual management charge of 0.3%.
B&CE director of policy Darren Philp said clarity was needed on whether 1.8% would be charged on pots transferring into NEST after restrictions were lifted.
“If it is, then this disadvantages members,” he said.
“If it isn’t, then this provides NEST with an unfair advantage, made possible through government funding.”
Now Pensions said it and other providers wanted to continue serving the pensions market as auto-enrolment reached smaller employers.
“This ambition will continue to require significant investment,” it said.
“We do not have the luxury of government funding, and we, therefore, believe that a level playing field will be vital in this environment, to ensure that healthy competition continues.”
Last year, the government announced it would lift the NEST restrictions, although the EC only agreed to this a year later.