Transfers into Nest will be remain subject to a 0.3 per cent charge and the provider will be blocked from competing in the decumulation space, it has been confirmed.
Nest retains the option to charge employers for bulk transfers but has confirmed there will be no exit charge for transfers out. The Government recognised in a statement to Parliament that a 1.8 per cent initial charge would have be excessive.
The TUC has slammed the Government’s decision to bar Nest from developing decumulation products, published in its consultation response today, arguing it will leave pensioners at risk from scams. The Government says it has listened to arguments from the industry that the small scale of auto-enrolment retirement pots mean it is unlikely new hybrid products will be developed for several years. The Government says it will review the Nest decumulation bar as pot sizes grow, and may reverse its decision if a thriving, competitive market does not develop.
Nest chair Otto Thoresen says: “We’ll be watching market developments closely. In the meantime, we want to work with industry and will keep developing our ideas with the aim of getting members the help they need as their pots grow.
“We also welcome the move to allow employers to contractually enrol workers into NEST and will work with government to enable this.”
TUC general secretary Frances O’Grady says: “It is deeply disappointing that ministers have caved in to vested interests. Pension savers have been ill served by the traditional pensions industry for decades, being shoe-horned into inappropriate products, often with high fees that have left them worse off. The announcement that ministers won’t allow Nest to help savers who need it means the risk that government just stands by while more workers reaching retirement fall victim to rip-off products and outright scams.”
Hargreaves Lansdown head of retirement policy Tom McPhail says: “The freedom for Nest trustees to set the transfer in fees is hugely beneficial for pension savers. The trustees must act in the best interest of their members, so expect them to opt for no initial charge to transfer in old pension plans. Consolidation of pensions is vital to ensuring people get to retirement with enough income.
“The reduction in charge and increased market competition points uneasily towards the £500 million loan which remains the elephant in the room. A formal repayment structure would go a long way to allaying fears that the Government will never recoup the money they have spent.”
AJ Bell senior analyst Tom Selby says: “Unleashing a state-backed monster into the already competitive drawdown market without first compiling evidence of consumer detriment would have been a mistake. Clearly if there is proof of market failure in any industry the Government should consider stepping in, but that case has not been made.
“The Government is right to keep the embryonic pension freedoms market under review and if it becomes clear those on low incomes have too few options, it should consider intervening. Clearly the world has changed since the pension freedoms were launched and it is vital all savers are catered for in this rapidly developing market.”