Will polticians improve NEST?

The new NEST workplace pension needs to allow transfers in and out of the scheme if it's to be effective. But will the politicians get their heads around this and make the necessary changes?.

Justin is back, so I’ve come back too. And, just this once, I have something good to say about politicians. Not all politicians, of course.

Cast your mind back a couple of years. Alastair Darling was at No 11 when his boffins came up with NEST, the new pension scheme that everyone is going to be enrolled in, unless they are already in an ‘exempt’ scheme, or decide to opt out. I wrote to the Chancellor:

“I am however especially concerned about the decision not to allow transfers in or out of NEST. This seems to run counter to everything that has been done to create flexibility for savers. I guess any employer running a Stakeholder will simply switch to NEST. This will leave the members with mostly trivial pension pots charged at 1.5% or 1% of the fund value annually………I think the Government has a duty to the people in the original Stakeholder target market. It would be fairly easy to allow anyone enrolled in NEST to transfer in up to say £20,000 from a Stakeholder or any other personal pension.

It would be equally easy to recognise that circumstances change, and that NEST members may subsequently become much better off and want to manage their growing pension savings in, for example, a SIPP.

Transfers in would help the NEST finances in the early years. Transfers out would not happen for some time, and their impact on NEST finances would then be negligible.

Will you ask NEST to reconsider this part of the rules?”

Needless to say, I got an anodyne reply from some junior assistant numbtie to the effect that they knew what they were doing.

A new report from the Work and Pensions Select Committee says…. the ban on transfers in will stop savers consolidating small pots in Nest, which it says is the “obvious” vehicle for aggregating small pots. Hooray for the Work & Pensions Select Committee.

Read this article at http://www.candidmoney.com/articles/article250.aspx