MPs divided over Nest-style drawdown default

CMackinlay

MPs on the Work and Pensions committee are divided on the need for policymakers to intervene in the post-freedoms decumulation market.

Last week, the committee said the Government should not create a default option for savers who do not engage with their pension at retirement. It added: “Legislation for default options should only be introduced if long-term monitoring of the consumer outcomes from pension freedom indicates it is necessary.”

The last government has already intervened in the pensions accumulation phase by capping charges for auto-enrolment schemes at 0.75 per cent and creating Nest.

Speaking at a roundtable hosted by Prospect magazine last week, Conservative MP and committee member Craig Mackinlay said: “I’ve now come round to the thought that there has to be more of a default, like a fund of funds that is deemed to be pretty safe and pretty pedestrian.

“It should just about do for most people and there would be a market driven, safe fund that is the place to be, a little bit like Nest.”

Mackinlay’s fellow committee member and pensions all-party parliamentary group chairman Richard Graham maintains that the introduction of a default would mark a return to “the idea that the man in Whitehall knows best”.

Nurture Financial Planning managing director Simon Linstead says: “It just isn’t cost effective for us to deal with people with small pots but they desperately need some support, so  there could be a place for this.”