Pension providers are to apply to join a national employment savings trust panel which will offer annuities to Nest members.
Nest is building a shopping-around process for investors coming up to retirement and insurers will pitch to the Government-backed scheme to be part of the panel, which will focus on people with small pension pots. Standard Life, Legal & General and Prudential are all expected to apply to join the panel, which will be unlimited in size.
Standard Life head of pensions policy John Lawson expects the Nest trustees will assess both the annuity rates and the security of the company.
He says: “An annuity rate is a double-edged sword because it also relies on the ability of the office to pay it out for the remainder of your life. I would think that another part of the procurement will be to consider the solvency of other providers.”
Legal & General pensions strategy director Adrian Boulding refuses to confirm whether L&G is in the running for a spot on the panel but says the company has “quite an appetite” for small pension pots.
Aegon, Friends Provident and Pru also refuse to say if they will enter the tender process although Scottish Widows rules itself out.
Nest has indicated that lifetime annuities would be the most suitable product for its members, particularly in the early years of the scheme.
In an effort to remain low-cost, the scheme will principally adopt a self-service app-roach, with significant time and resources already given to developing the scheme’s web-based communications. Providers will have to show they can integrate their systems with those used by Nest.
Nest declined to comment.