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Nest a second-rate option that could lead to misselling

It is important for everyone to save for their retirement. It is great that the Government is insisting that all employers make pension contributions for eligible workers (those earning at least £7,475 a year) from 2012. The suggested rate of 8 per cent (minimum 3 per cent from the employer) could make a real difference but I have concerns with Nest.

For Nest Corporation to be able to afford to run the scheme, it is bound to have a limited fund choice and therefore offer poorer value for money compared with other pensions.

With auto-enrolment, the Government is forcing people into a scheme that will almost certainly be a second-rate option and is potentially opening up a future pension misselling scandal. If people discover 10 years down the line that their funds are not performing, who will be accountable? The employer? The Government? Nest?

What would be better is to insist that employers contribute into a scheme that they have set up or that their employees have chosen, not one that the Government has picked. I have long argued in favour of combining pensions and Isas.

George Ladds is head of investment and pension research at Fair Investment Company

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