Nest has warned the Government allowing automatic transfers of pension pots when people move jobs will increase member costs and reduce overall pension saving.
In December, the Department for Work and Pensions issued a consultation outlining possible reforms to help people consolidate small pension funds.
Options range from small changes to encourage transfers to an automatic transfer system where pension pots could either be consolidated in one or more ‘aggregator’ schemes or move with people from job to job.
In its response to the consultation, Nest says: “We’re concerned that any model based on a very large number of transfer transactions runs the risk of introducing substantial new costs into the system.
“A ‘pot follows member’ model could introduce as many as several million such transfers each year. These costs, in one way or another, will ultimately fall on members and reduce overall pension saving.”
The Government-backed scheme also raised concerns that adopting a model which uses a single aggregator of small pots, rather than multiple aggregators, would leave a competition void.
It says: “We believe that there are some potential risks around a single designated aggregator scheme because of the absence of competition that this would leave. This could give rise to a need for greater regulation around prices and service standards.
“At the same time, we recognise the challenge that multiple aggregators, while potentially solving the challenge of giving schemes somewhere to send small pots, do so at the expense of the consolidation benefits for members that such an approach would seek to provide.”