The Treasury is having second thoughts about Nest over fears it will lose money in the short term because of the increased cost of tax relief, according to independent policy adviser Ros Altmann.
Speaking last week at the Money Marketing Retirement Summit in Dublin, Altmann said the Department for Work and Pensions remains positive about Nest but the Treasury has concerns.
She said: “The Treasury has suddenly gone cold on the idea of Nest because although there is the long-term potential benefit of lower means-tested benefits to be paid out later, they are worried about the short-term potential drain on the resources of
the state from tax relief if too many people go into Nest.”
Altmann said Nest offers “tremendous opportunities” for the industry and big employers but not for consumers.
She said: “There are opportunities for the financial industry because for everybody that is putting money into these products they will earn a fee and there are opportunities for large employers to cut contributions and costs substantially.
“In a defined-benefit scheme, your average employer is putting in around 20 per cent and the average DC contribution is between 6 and 7 per cent. The Nest legislation talks about 3 per cent of band earnings and, in fact, you can start with just 1 per cent.”