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Talks on private sector replacing Nest

The Government is holding talks with product providers to investigate the possibility of scrapping the National Employment Savings Trust and making it profitable for the private sector to fill the gap.

Money Marketing understands the talks are taking place as part of the Government’s review of Nest, which is due to report next month.

The Government could save £575m over 10 years if it chooses not to go ahead with the second stage of the contract with Tata in October.

A source close to the matter says: “The Government is looking for a model that does not involve public spending commitments and is considering lateral ways of delivering this.”

Another source told Money Marketing: “There is a desire to find ways to save money and there is quite a big potential bill around Nest. If there are other ways of tackling it the Government is up for them.”

Lansons Public Affairs and Regulatory Consulting director Richard Hobbs adds: “I hear the review is becoming more radical as time goes on. There is a growing feeling that Nest is under a lot more scrutiny than was previously implied by the Government.”

Last October, Money Marketing revealed that a consortium of leading life offices had been established to draw up a plan B alternative to Nest for the Conservatives.


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. In fairness Labour should have taken this approach in the first place. Instead they wasted millions of pounds of taxpayers money to set up a scheme for which only one outsourcing company expressed an interest.

    It will be interesting to hear the coalitions new proposal. It does make advising corporate clients a total nightmare. We have been telling them about personal accounts/nests for a few years now.

  2. Fantastic. At last, a government seeking a solution from the people in the industry and not the FSA !

    If opinion could be sought from IFA’s as well then just maybe, we’d get a sensible, consumer friendly package.

    Somerset IFA

  3. They should you use the Group Stakeholder Plans set up by legislation in 2001

  4. Common sense surely. If the private sector could be relied on for Stakeholder plan implementation then whats the difference? State the terms required, and the players will emerge.
    Main issue though is to also remove the pointless (achieves nothing valuable) burden on employers with the proposed auto enrolment admin processes

  5. Heather Allison 5th August 2010 at 10:08 am

    So a very large sum of money may be saved if common sense prevails however how much has already been spent to get NEST this far?

  6. I wonder if they will introduce Stakeholder Pensions via insurance commpanies?

  7. Was it not a previous government that bribed a whole generation to the tune of £9 billion to ‘opt out’ of serps. The result? Wrong financial advice to millions producing small pension investments being eaten up with charges. Nest it seems to me is designed for people on low incomes — not the sort of people the private sector is interested in. When will governments learn that if they want to avoid a mountain of Pension benefits in the future, they need to spend a relatively small amount now.

  8. Does anyone believe the only saving is £575m over 10 years. We all know that the hidden costs were going to be much higher and that assumed the model worked. Great news.

  9. I didnt mean that autoenrolment itself shouldnt happen (separate issue), just that the way it is implemented needs to be sensible and business/employee friendly.
    THE MAIN POINT surely is that an autoenrolment obligation can be introduced, with any changes to the products that can be used to be dealt with separately.
    This whole thing could/should have been so simple and still can be –
    Firstly, anounce autoenrolment and the date it will happen;
    Secondly, include freedom of CHOICE for clients and employers to use ANY approved pension scheme;
    Thirdly, let the private sector create products and BID to be chosen as the DEFAULT product (reviewed annually?) for any clients who dont need or have access to advice. Competition will deliver the best outcome and if the default provider is changed in future, then the previous provider has to transfer all accounts en masse to the new provider unless clients request to stay?
    Now, who could choose the default provider? IFAs or the Govt/FSA???

  10. So here we are nearly 10 years on and the current government is talking about private sector money purchase plans with auto-enrolment.

    But will the insurance companies this time round be stupid and spineless enough to allow the government to dictate their contract terms and charges? Doing so last time did incalculable damage to their balance sheets.

    Advisers who conned themselves into believing they could ever make any money out of stakeholder must surely be regretting such groundless optimism. Stakeholder pension sir? Yes. We charge a £250 advice fee and a £250 implementation fee. Click, brrrrrrrrrr.

    Stakeholder is and was always going to be unworkably unprofitable. The only way to address that, even partially, is for the government to get on with the simplification of pensions that it promised before the election but about which it seems so far to be doing virtually nothing.

    Carrot is almost always better than stick. It’s a crying shame that tossers like Mark Hoban seem unable to grasp such a notion.

  11. This after spending £85,000 pa on one civil servant consultant spending only 1 day a week on NEST!

    Employers need to wake up. Some companies haven’t got a clue..I spoke to one accounts dept this week about Salary Sacrifice for an employee earning almost £50K pa & despite the fact that the firm could save over £600 per year on NHI savings which they could optionally rebate back to the employee, the finance manager didn’t even want to know about it all!

  12. NEST
    I asked the questions below thisis the full answer received back objective or subjective ? you decide:-

    Thank you for your Freedom of Information request received on 23 June 2010. You asked for information about the NEST administration contract. In particular:
    • Who authorised the payment;
    • If the payment will be sent to India;
    • Who is in charge of this contract now; and
    • If it is one that is being “reviewed”.

    The Personal Account Delivery Authority’s (PADA) remit included a function to assist in establishing a pension scheme on behalf of the Secretary of State. PADA had a specific power to enter into agreements in order to fulfil its function, and this included arranging contracts to set up the National Employment Savings Trust (NEST).

    The NEST Scheme Administration Services contract was let by PADA following a competitive dialogue process. This process was governed by the Public Procurement Rules.

    Up until 5 July PADA had responsibility for authorising payment to TCS. From 5 July responsibility transferred to the NEST Corporation. TCS Ltd is registered in England

    The Government remains committed to introducing auto-enrolment as an effective means of increasing pension saving, but announced on 24 June a review on how to deliver auto-enrolment. The review will consider whether the present approach strikes the right balance between cost, benefits and risks for individuals, employers and the tax-payer. This will include whether NEST is the right intervention to support pension savings amongst low to moderate earners.

  13. “This will include whether NEST is the right intervention to support pension savings amongst low to moderate earners”.

    Er, how difficult do people make these things?!?!?…Lets keep it simple…and save them THEIR time and OUR money reviewing this…
    If a “low earner” WILL pay into his own pension, he probably already is. If he WONT, the sudden invention of NEST wont make him change his mind. He has plenty of options already.
    IF he is forced to pay into a pension, then he probably will…and any plan meeting basic criteria will do…(but I dont think auto-enrolment involves plans to FORCE employees does it? opt outs exist etc)
    ..and IF his employer is going to be forced to pay into something for him, then make him pay it into the plan of the clients choice, using a default (eg stakeholder?) plan to keep things simple if the employee has no views….

    End of review?

  14. Surely the whole point of NEST was to have a (NuLabour) influenced investment fund with a voting position accross just about all quoted UK industry; in other words it had more to do with social engineering than providing retirement benefits…..

  15. If the cost of NEST to the taxpayer is more than the saving to the taxpayer through reduced means tested benefits, the expenditure cannot be justified. If the cost of NEST to the taxpayer is less than the saving to the taxpayer through reduced means tested benefits, it’s probably mis-selling.
    We had Personal Pensions that were mis-sold, we had Stakeholder that flopped and now we are spending a fortune of public money developing under form of “personal accounts” system under which the majority of people that do not opt out are likely to be those who are receiving means tested benefit anyway so we will have another mis-selling scandal!
    Why not get the ducks in a row, in the right order:
    1. Increase state pension age to 70 for men and women from 2013.
    2. Replace the basic state pension and myriad of second components by a citizen’s pension just sufficient to keep people out to means tested benefits – then scrap means testing for those over state pension age (70 for now). Also get rid of everything relating to contracting-out for the future.
    3. Relaunch/revitalise existing “stakeholder” solutions offered by the private sector to deliver a base level money purchase scheme with auto enrolment and the other objectives of NEST.
    4. Educate
    5. Educate
    6. Monitor

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