The Government has bowed to industry pressure not to allow Nest to enter the drawdown market.
The Department for Work and Pensions launched a consultation last year amid concerns that small-pot savers, including Nest members, did not have access to enough products aimed at mass market decumulation.
While some commentators suggested Nest’s entry could spur innovation and competition in the decumulation space, DWP said today it had decided against the move.
DWP notes that respondents to its consultation pointed to “distortionary effects that Nest could have on the market and thought that this could have a negative impact on consumer choice and value.”
Its response to the consultation, DWP says: “One key concern expressed by a number of respondents was that if Nest provided retirement products, this could unduly distort competition and stifle innovation in an emerging area. There were additional concerns that the tax-payer funding Nest receives could allow it to develop a service that others could not compete with.”
Some industry representatives also questioned whether a new retirement product from Nest would be commercially viable due to the start-up and delivery costs it would incur.
DWP says: “Given the reassurance we received from the industry regarding their intention to innovate, Government does not propose that Nest should begin to offer additional decumulation options at this time.”
It said that it would keep this option under review, however.
AJ Bell senior analyst Tom Selby says: “Unleashing a state-backed monster into the already competitive drawdown market without first compiling evidence of consumer detriment would have been a mistake. Clearly if there is proof of market failure in any industry the Government should consider stepping in, but that case has not been made.”