NEST will be available for many individuals to use outside of the workplace, in particular the self-employed. FSA  Conduct of Business Changes published 09/11/12.

  This is what the DWP’s Pensions Advisory Service has to say about the structure of NEST

 

NEST will be a trust-based defined contribution occupational pension scheme.  It will be regulated in the same way as existing trust-based defined contribution schemes.

 

It may be that the FSA have got the wrong end of the stick as might be suggested to the references in their consultation paper to NEST as a product (not how we normally think of occupational pensions schemes).

If however they are speaking for Government as a whole, then the Pensions Landscape for those advising the self employed is going to change radically.

When giving advice on pensions, advisers should take into account whether the person could use NEST and whether it is capable of meeting their needs. COBS 6.2A17 G states specifically that:  

 ‘In providing unrestricted advice a firm should consider relevant financial products other than retail investment products which are capable of meeting the investment needs and objectives of a retail client, examples of which could include national savings and investments products and cash deposit ISAs.’…..We would consider NEST to be a ‘relevant financial product’ in the context of advice on pensions. (FSA- Conduct of Business changes)

One of the main thrusts of the FSA paper is to ensure that financial advisers do not recommend their clients opt-out of auto-enrolment in favour of independent provision. This is clearly sensible for employees who would otherwise stand to pick up a contribution from their employer.

The FSA are therefore minded to make it as onerous for an adviser to opt someone out of an automatic enrolment scheme (eg a GPP being certified for auto-enrolment)s it is for them to advise someone to leave or not join an occupoational scheme.

If financial advisors are also going to have to benchmark personal pensions “sold” to the self-employed , it is hard to see how the new “Pensions Landscape” offers them any real opportunities to recommend traditional  personal pensions at all.  It remains to be seen whether the market for SIPPs will expand to support the IFA community’s aspirations.

The “pensions landscape” ,as the FSA calls it, looks as barren for traditional financial advisers as a first wold war battlefield.

The landscape is hardly more comfortable for traditional providers who are asked to consider the impact on their legacy  book of personal pension business.

(Auto-enrolment ).. may lead to high levels of individual pension policies becoming paid up or lapsing as the reforms are introduced.

If firms cannot structure their charges so that the business is economical for the firm and consumers can get value from the product, then they should consider whether it is appropriate to provide a GPP in these circumstances

The triple whammy of these proposed strictures, the Retail Distribution Review and the FSA’s Consumer Protection Strategy, (not to mention  the proposed creation of the Consumer Protection and Markets Authority) are likely to all but wipe out the opportunity for the traditional pensions salesman.

• Pension posers (bbc.co.uk)
• New national pension scheme gets the go-ahead (confused.com)
• New govt pension scheme could be risky for savers (confused.com)
• Can we make pensions simpler? Please? (blogs.confused.com)
• All firms ‘must offer pensions’ (bbc.co.uk)
• Pension scheme membership falls (bbc.co.uk)
• New pension won’t feather your Nest (independent.co.uk)
• Pensions: women win, but who loses? (telegraph.co.uk)
• Employer Duties & Pension Reform [Paul Gorman] (ecademy.com)
• Pension reforms catch small employers (telegraph.co.uk)
• State pension: Q&A (telegraph.co.uk)
• Firms will have to offer pensions (mirror.co.uk)
• Money Talk (bbc.co.uk)
• State Street to administer UK national pension fund (reuters.com)