Row over ‘dead duck’ Nest escalates

A row has erupted over the strength of Nest’s proposition to employers after AWD Chase de Vere labeled the provider a potential ‘dead duck’.

AWD says higher charges for longer, low levels of support and its contribution cap mean employers should not choose Nest unless it changes the way it operates.

But Nest chief executive Tim Jones has rejected AWD’s comments, saying the provider is on track to achieve critical mass with research showing 21 per cent of large employers, those with 5,000 or more employees, saying they are likely to use the provider for some of their workforce.

Hargreaves Lansdown head of pension policy Tom McPhail has accused AWD of being ‘premature and inappropriate’ in its comments on Nest.

The row broke out when AWD corporate advice manager Jon Dixon issued a statement saying the initial penetration rate for Nest will be lower than expected, meaning it could take considerably longer for them to repay their establishment loan, meaning that client charges could be higher for longer. He also attacked Nest’s proposition for providing little in the way of support, which would push up employers’ own costs, and for only offering online employee support.

In contrast, other providers such as Now and People’s Pension are more experienced at providing mass pension arrangements, have competitive charges and offer far greater support to employers and employees, he said, adding that Nest is hampered by its contribution cap.

Dixon says: “We are fully supportive of auto enrolment and the real need to get home the message that “tomorrow is worth saving for” but we are wary of recommending Nest to many of our clients. Nest wants to be the default pension scheme but instead is in danger of becoming the default scheme for the unadvised and unaware employer

The bottom line is that Nest needs to change if it wants to compete with both new-wave and traditional pension providers.”

Jones says: “The comments from AWD Chase de Vere don’t reflect our experience. Nest is a low charge scheme and it has been independently recognised as such.

The response we are getting from employers is very good and we are very confident we will be used by a large number of employers. We already have around 30 very large employers committed to using Nest in the first six months of staging.

“Nest is designed for people who currently don’t have access to a workplace pension. They tend to have lower salaries that people currently in workplace pensions and are unlikely to have previous pension pots to transfer. Whilst some employers have told us that the restrictions are causing difficulties, others are reporting that their workers won’t be affected, in the short term at least.

“Any employer which chooses NEST can do so with confidence that it has been designed to help them meet their automatic enrolment duties, and to provide a great pension scheme for their workers.”

McPhail says: “Nest is essential in making auto-enrolment work. Its pricing structure is competitive and balanced. Until Nest came along no-one had ever contemplated competing in this space. It is handicapped by its contribution cap and in an ideal world that would go.

“The social obligation role Nest plays means it will take any employer, and unlike other providers it does not have the option of turning away employers, and they are here for the long term.

“To dismiss them on such superficial evidence is premature and inappropriate.”