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ABI says industry unlikely to fill Nest gap

The Association of British Insurers says it is unlikely providers could fill the gap if the National Employment Savings Trust did not go ahead, even if auto-enrolment parameters were adjusted.

Money Marketing revealed earlier this month that the Government has been holding talks with product providers regarding the feasibility of an industry-led replacement for Nest. It could save £575m over 10 years if it chooses not to go ahead with the second stage of the contract with Tata in October.

But in its submission to the Department of Work and Pensions’ review of auto-enrolment, the ABI states: “The rationale for Nest is not that the industry does not want to serve certain sections of the market but that for some employers the industry will only be able to do so on terms which are either unacceptable to the employers or unacceptable to politicians and/or regulators.

“This also impacts employees as they have no choice over the scheme they are enrolled into. This means that, as things stand, it is unlikely that the private pensions industry could fill the gap is Nest did not go ahead. It would remain unlikely even if the parameters for auto-enrolment were adjusted as proposed in this submission.”

The ABI wants the current auto-enrolment band of age 22 up to state pension age to be retained and believes no one should be excluded based on the size of the firm they work for.

But it says auto-enrolment should only apply to those earning £10,000 per annum or more.

The trade body says only basic pay should qualify as earnings and contribution calculations should start from the first pound of earnings.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Two points here.

    1. Telling the population that hey have to save for themselves and that means sacrifice now is the Govt’s nettle and no one should let them off that hook.
    2. Managing money has an implicate cost and the less of someone’s money you manage the grater the proportion that goes in costs. We are not charities and have to make a reasonable return on capital, both human & financial or we will employee it elsewhere.

    Back to the Gov’t of the day and good luck!

  2. This whole NEST things is pile of garbage. Instead of making stupid pronouncements like this, the ABI ought to be sufficiently astute to see that stakeholder hasn’t worked, the cost of NEST has spiralled out of any realm of moderation (still no investment manager) and that the industry isn’t going to be railroaded into participating in a profitless, nationwide auto-enrolment scheme.

    What is needed is genuine, far reaching and fundamental simplification, so that pensions will be perceived as offering something at least approaching good value for money without the shackle of GAD rates.

    The main sticking point so far appears to be Mark Hoban, as slippery, mendacious and as untrustworthy a politician as you could ever wish to meet.

  3. Whilst I accept that it is desirable for everyone to have a realistic retirement pension it must be a simple to use and easy to understand scheme.

    The current proposal will be a nightmare to manage…particularly for those who do temp/interim/casual work as well as the employers and employment agencies/businesses that engage them.

    I suggest that the collection of money could be done by HMRC via PAYE. Money could be deducted from workers and employers on earnings above an appropriate level (perhaps the tax/nic threshold), shown as deduction for pension, and paid with the tax/nic payments.

  4. “Industry”? What industry? Has it not been strangled by regulation to the point of no return?

    Mind you, was it not built on quicksand?

  5. Here goes!

    I think that rather than using an employer to collect their employees’ cash from net pay which is then forwarded along with some of its own money to some whole new arrangement called NEST or whatever, what should happen is that some extra tax is taken from both.

    The more an employee earned the bigger the retirement benefit built up, although this could be capped to stop the rich getting even richer.

    This extra pension could be paid by the State along with the basic state pension. No need to worry about triviality, small annuities, new legislation, auto enrolment measures, helplines and opting out etc.

    We could call this the Additional State Pension or even the State Earnings Related Pension Scheme or similar……I know this sounds radical, but the PAYE mechanism is reliable and would not increase the administration burden on employers. They are used to collecting cash and sending it already. It would not cost anything like £575m (read £1,200m really) as it’s already set up.

    Mind you, I’m not sure if this a new idea? I seem to remember reading about this before somewhere……..

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