Having spent the fat end of £300m finding out how to provide DC pensions to UK employers and engaging with Tata in a £600m administration contact, Tim Jones and his band of salesmen, seconded civil servants and IT twonks must be feeling they need a few feathers in their NEST- more exactly – a few customers.
The signs are not good.
The 1.8% contribution charge makes NEST look more expensive to large employers (who are the first to engage with Auto-Enrolment). The £4,200 contribution limit makes it a non-starter for employers looking at NEST to accumulate pensions for higher earners. The investment strategy has been rightly ridiculed as “fighting the wrong fires”.
The word on the street that the leaked discussions between NEST and the DWP to rid itself of the contribution cap are going nowhere. The ABI made it perfectly plain that this was the price to pay for not protesting to the EC on the unfair competition engendered by NEST’s various soft loans from the tax-payer.
The word is also out that the abolition of early leaver refunds (which would have created a level playing field for NEST who can’t refund contributions to early leavers) isn’t going to happen either or if it happens it will merely reduce the two year vesting period to one year.
The question is just where NEST reckon their new business is likely to come from over the next couple of years? If NEST is merely there to pick up the scraps from the hundreds and thousands of really small employers then you’ve got to ask what they’ll be doing till the SMEs stage in 2015/16.
They should not be relying on Government changing the cards in their hands. They may feel they are short of a couple of aces but they’ve got to make the best of what they have.
Take as an example, the issue of contribution clearing. If consultants like us are going to support NEST as a feeder scheme or other supporting structure to existing corporate pensions, then we need to find a way for employers to manage the complexities of both existing interactions and the further interactions with NEST. Nowhere are the difficulties of auto-enrolment going to be felt more acutely than in payroll.
My understanding is that far from being proactive on this issue (as the major insurers and TPAs are being) they have sat on their backsides referring all enquiries to Tata.
Unless they take the opportunities presented to them (and the payroll opportunity can be easily solved by chatting with the antipodean clearers such as Superchoice) , few in the pensions industry are going to shed too many tears for them.
Not many start-ups get a £300m R n D budget, not many build the appliance without a power cable.
Like most NGOs the NEST Corporation has been high on hype and low on action. The recent announcement on Retirement Income Providers delivered with the dead hand of the worst kind of PR has rightly been ridiculed as “too little too early”. It’s typical of the kind of non-event we’ve got used to in the past nine months.
If NEST wants to justify its massive running costs then it needs to urgently buck up its ideas. The private sector has every reason to be intolerant of the endless razzmatazz which so far has done nothing but create market disturbance
get yourselves a proper job
In the meantime, we will need to get on with the serious business of working out how the first wave of auto-enrolment stagers are going to organise themselves. Not around NEST I’ll be bound!
- “Buying a Retirement Income” from an RIP (henrytapper.com)
- Clearing up a few things around pensions (henrytapper.com)
- The workplace pension changes that affect you (confused.com)
- New Nest pension ruffles workers’ feathers (independent.co.uk)
- New national pension scheme gets the go-ahead (confused.com)
- New govt pension scheme could be risky for savers (confused.com)
- Robert Peston (bbc.co.uk)
- New pension rules ‘risk a mis-selling scandal’ (telegraph.co.uk)
- Should’ve gone to mallowstreet. (henrytapper.com)
- One in two face poverty in retirement (telegraph.co.uk)