As I’ve said before NEST is a pension eunuch. It cannot accept transfers, accomadate chunky contributors or pass on the benefits of its collective purchasing in really low charges. NEST needs to have balls – it doesn’t and this is what happens.
Our client has an old fashioned occupational DC plan which they want to upgrade. Many of the members earn little and contribute less, they are not attractive to the insurer of the scheme who have refused either to drop their charges or countenance taking on more employees when the company stages auto-enrolment next year. I don’t blame the insurer, they have no public service obligation to help these people.
The employer has suggested that perhaps they could transfer the member records and funds using an actuarial certificate to another occupational scheme and asked whether we might approach NEST as they know NEST has a public service obligation to accept auto-enrolled members - however commercially unattractive they may be.
No dice! NEST cannot accept transfers so it looks like the sponsor and it’s trustees are stuck between a rock and a hard place. Unless we can find another insurer or a master trust prepared to offer preferential terms to the trustees on a bulk transfer, the members are stuck where they are.
Now you might argue that this is a function of the market and I would agree, if these members are being accommodated at a reasonable price then normally I would advise the sponsor “hard luck”.
However we are not in normal times, the sponsor is aware that NEST offers terms that are approximately 60% better than those offered by the current insurer. NEST also offers better communications, operational interfaces and investment options.
The Association of British Insurers has argued that NEST has benefited from a tax payer loan of at least £300m and that it is this loan that is allowing NEST to offer what it does at the price it does. However we are seeing similar organisations to NEST, most notably NOW pensions offering similar terms without the subsidy and my suspicion is that NEST’s £300m + taxpayer loan has probably been spent on procurement and similar WOTs.
I’m pinning my hopes on our the likes of NOW giving the trustees a bail-out. But this shouldn’t happen - this can’t be right.
NEST has set a new benchmark in pension provision but it’s knackered. Give NEST its balls back and we’d see a real improvement in the options open to our client. Keep NEST in its current state and clients like that will have been shown the promised land and told to wander around in the wilderness for another 40 years.
- Auto-enrolment – winners and losers. (henrytapper.com)
- CIT; your ABC of auto-enrolment! (henrytapper.com)
- New national pension scheme gets the go-ahead (confused.com)
- The workplace pension changes that affect you (confused.com)
- Critics point to fundamental flaws in Nest pension scheme (guardian.co.uk)
- How CPP reforms will affect your nest egg (theglobeandmail.com)
- A fifth ‘have no pension savings’ (bbc.co.uk)
- Make NEST the dustbin of our pension dreams? (henrytapper.com)