The U.K. government has decided the National Employment Savings Trust, London, will not be allowed to offer retirement income or decumulation strategies.
The government published a consultation paper in July seeking comment on whether NEST should better reflect changes to the U.K. retirement market. It cited the introduction of so-called pension freedoms in April 2015, which remove the requirement for participants to purchase an annuity to provide income in retirement, as a reason to consider changes. Proposals included the provision of new ways for participants to access their savings, the expansion of the plan to enable individuals, employers and other pension plans to access NEST's services, and whether NEST should provide decumulation services for participants.
Following the completion of the comment period, the government said Thursday in a response paper that, having been reassured by the industry that other options will be offered in the market, it “does not propose that NEST should begin to offer additional decumulation options at this time. However, given the significant lead-in time to enable retirement products to be developed and launched, the government will continue to keep NEST's role in offering decumulation products under review in light of market developments.” The government said it will continue to monitor the market. “If it is clear that the market is not developing in line with the needs of NEST members, we will consider enabling NEST to offer a fuller range of solutions.”
“It's essential that our members are able to take advantage of pension freedoms to help them achieve good outcomes,” Otto Thoresen, chairman of NEST, said in a statement.
“We'll be watching market developments closely. In the meantime, we want to work with industry and will keep developing our ideas with the aim of getting members the help they need as their pots grow,” Mr. Thoresen added.
Reaction from others in the industry was mixed. Gareth Evans, head of corporate affairs at Royal London, said in an email: “It is right that government has decided that now is not the time for NEST to offer a suite of retirement income products. The post 'pension freedoms' market is still in its very early days and there is certainly no evidence of market failure at present.”
However, the Trades Union Congress, a federation of trade unions in England and Wales, expressed concern at the decision. “It is deeply disappointing that ministers have caved in to vested interests,” said Frances O'Grady, TUC general secretary, in a news release. “Pension savers have been ill-served by the traditional pensions industry for decades, being shoehorned into inappropriate products, often with high fees that have left them worse off. Those reaching retirement in the coming years desperately need easy access to suitable, good-value products to see them through their old age.”