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Categories:Pensions,Politics

Webb "reflecting" on future of Nest restrictions

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Pensions minister Steve Webb says he is “reflecting” on whether or not to remove restrictions placed on the National Employment Savings Trust.

Transfers in and out of Nest are banned and annual contributions are capped at £4,200. The restrictions were due to be looked at again in a review in 2017. With the delay of auto-enrolment for smaller firms it is now unclear when that review will go ahead.

Speaking at work and pensions questions in the House of Commons this afternoon, Webb said the restrictions on Nest were put in place to ensure the scheme focused on low to middle income earners.

He added: “The situation has moved on, competitive developments in the market have emerged which were not necessarily foreseen, so we are certainly reflecting on the role of those constraints.”

He was responding to a question from Shadow pensions minister Gregg McClymont who said the restrictions should be looked at because the country is facing a private pensions “crisis” with 60 per cent of people saving nothing for retirement.

Political pressure has been growing over pension charges with Labour leader Ed Miliband threatening to push for them to be capped if they do not fall and tens of MPs signing a Parliamentary motion calling for “urgent action” to be taken to lower them.

Webb told MPs that he is “encouraged” by the low charges being announced by Nest’s competitors, but added that his department was ready to use cap charges on auto-enrolment schemes if necessary.

He says: “At the moment our judgement is that the early roll out of auto-enrolment will be the big firms who will get good deals and good charges. We have more competition than perhaps was expected. Nest is coming in at 0.5 per cent, others in some cases are coming in below that.”

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Readers' comments (5)

  • When will these guys learn? Ed Milliband is 'threatening for pension charges to be capped if they do not fall'. I've always believed that pensions are low on the wish list for clients & if there is no incentive for us to encourage people to save for their long holiday in retirement then unfortunately that 60% (people saving nothing for retirement) will not decrease. PS - any guesses as to how many will 'opt-out' of NEST?

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  • This is naive at best. Just watch the private pensions sector close ranks and villify him and NEST if this happens

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  • One of the worst things to impact on saving to retirement was the Turner report. The assumption that people need little encouragement to save for retirement has been proven totally incorrect. That's why NEST and compulsory workplace pensions are coming in. Many people view pensions as a cost, not a benefit, and the spectacular non performance of stakeholder plans, without enough payment for advisers to review regularly, proves it.
    My experience is that if people meet advisers regularly, discuss where their pension pot is invested, make alterations where needed, and talk about what has changed since last meeting, then they own the retirement solution, and realise it's importance. If you restrict this level of advice to the higher net worth people, and by restricting charges to the mid and lower income, then you are condemming them to a lifetime of underperforming pensions. No fund of funds or managed fund has provided a good long term solution, but good, targeted advice using vanilla funds that are appropriate to the client's needs is the only way to provide a good service. Milliband's comments are crass, Webb needs to formulate a system where good advisers can get paid from the investments for a great service. Then the shortfall in retirement funding will start to get sorted.

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  • Webb would struggle to reflect in his own shaving mirror.

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  • This whole situation has been poorly researched and rushed out
    the low charges do not take into accoutn the additional early stage charges to repay the loan for setting it up (when thats taken into account, many of the uk providers offers are more attractive) also the limited and very cautious funds have been introduced as the ministers feared that early poor performance could jeapodise its future - EDUCATION is the key here, if you show people that, with say 30 years until retirement, a more speculative position could provide better long term returns
    let the industry state their case and (and this is the bit they tend to struggle with) act on it!

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