The Department for Work and Pensions has launched a consultation paper seeking comment on whether the National Employment Savings Trust should better reflect changes to the U.K. retirement market.
A number of changes have been introduced in the U.K. over recent years, including the introduction of so-called pension freedoms in April 2015. U.K. participants no longer need to purchase an annuity to provide income in retirement, and can instead choose to access their savings in different ways — subject to certain taxes — such as taking the whole amount as a lump sum, taking a number of lump sums or purchasing an annuity. A new state pension has also been introduced.
Changes may include providing new ways for participants to access their savings, and expanding the plan to enable individuals, employers and other pension plans to access NEST’s services, said the DWP in a statement accompanying the paper.
NEST-related legislation had already been amended, in 2015, to remove an annual contribution limit and restrictions on transfers in and out of the plan, effective in April 2017.
“As automatic enrollment starts to bed in, now is the right time to begin a discussion about what the next steps are in NEST’s evolution,” the paper said. “This call for evidence asks how it might adapt to meet the challenges and expectations of its members in the 21st century.”
The paper is split into chapters. The first sets out the background of NEST’s policy framework, its current situation and a series of principles that must be considered in weighing proposals for change to its framework. The second explores how the retirement market has changed over the last decade, including the shift toward large, multiple employer defined contribution plans, regulatory changes and pension freedom reforms. Chapter three is a call for evidence and views on a range of areas where the government might consider changing NEST’s framework, such as allowing NEST to provide decumulation services for participants, and whether the opportunities for individuals, employers and other plans to access NEST’s services should be expanded. The final chapter summarizes the paper and sets out the process and procedures for the consultation.
NEST was set up in 2010 ahead of an October 2012 move to automatically enroll all employees into workplace retirement plans. The consultation paper is open to the industry and public for comment, and will run for 12 weeks until Sept. 28. A summary of views and evidence will be published, and the DWP will publish its response within three months of the end of the comment period.
The paper is available on the government’s website.