MPs claim NEST will be ‘nobbled’ by private providers

MPs have questioned the role of the National Employment Savings Trust (NEST) since other master trust pension schemes have entered the market.

This year, several pension schemes angled as NEST competitors have launched in preparation for auto-enrolment in 2012.

In September Danish pension scheme NOW: Pensions and Pensions Umbrella Trust (PUT) both launched. Standard Life has extended its master trust pension in the autumn in preparation for auto-enrolment.

In an evidence session of the Work and Pensions Committee, which is examining NEST and auto-enrolment, chair Dame Anne Begg questioned how NEST could compete with these new players.

Begg asked how NEST could compete when it will be subject to restrictions on contributions (£3,600 per year per member) and transfers in and out until at least 2017.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), told MPs the restrictions on NEST were there to prevent employers with existing and more generous pension schemes from moving all their employees into NEST, and effectively "dumbing down" their provision.

Begg said: "Those decisions were in a landscape where it was likely that NEST was going to be effectively the default scheme and there were not going to be many other players.

"That is not the case anymore and that there are other providers who are coming into this market, but they do not face the same restrictions [as NEST].

"How can that be competitive when, in fact, they have already nobbled NEST before they have even got to the starting line?"

Segars told MPs the 2017 review of NEST's restrictions should be delayed because the government announced in the autumn statement that small businesses will have an extra year to prepare for auto-enrolment.

"The start date for auto-enrolment will be 2012 but the finish date now will not be until 2018-19. It would seem rather odd to do a review in 2017 before everybody is through that auto-enrolment process," she said.

NEST director of communications and engagement Graham Vidler said: "NEST has been designed specifically for its target market, that is, people typically earning up to £35,000.

"We believe our key differentiators include low charges for all members, whether actively contributing or not, ease of use and clear, understandable communications for those who are new to pension saving.

"Our investment strategy is based on careful research and delivers a sophisticated approach to risk management that we hope will drive good outcomes for our members."