NEST will not expand its decumulation offering to enter the drawdown market, the Department for Work and Pensions (DWP)
The government response said it “considers that it is essential that NEST members should have access to appropriate, low-cost retirement products that support the aims of auto-enrolment”.
“However, we recognise that the retirement market is very young and we hope that development of new products will progress at pace now that the freedom and choice reforms are well established. NEST members currently have very small pot sizes although that will change rapidly once minimum contribution rates increase.
“Given the reassurance we received from the industry their intention to innovate, Government does not propose that NEST should begin to offer additional decumulation services at this time. However, we will continue to monitor the market, including reviewing the conclusions of the FCA’s Retirement Outcomes Review later this year. If it is not clear that the market is developing in line with the needs of NEST members, we will consider the most appropriate response, including enabling NEST to offer a fuller range of solutions in the future. In addition, we think it appropriate, where in the interests of its members, that NEST continues to develop the ideas behind its retirement blueprint, including working with partners in industry to drive innovation in the area.
“The government will take forward proposals to allow employers to contractually enrol workers into NEST. Other changes to extend access, including opening the scheme to individuals and transfers from other schemes without a link to auto-enrolment will not be pursued at this time.”
The TUC has expressed concern at the government’s announcement that NEST will not be allowed to offer retirement income products.
More savers are coming to retirement with defined contribution pension pots. But following the pension freedom changes of 2015, most face the choice between cashing in their savings or expensive drawdown products from insurance companies that risk them running out of money.
The TUC says savers need easier access to products that provide them with a secure income in old age.
TUC general secretary Frances O’Grady said:
“It is deeply disappointing that ministers have caved in to vested interests.
“Pension savers have been ill-served by the traditional pensions industry for decades, being shoe-horned 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.
“The announcement that ministers won’t allow NEST to help savers who need it means the risk that government just stands by while more workers reaching retirement fall victim to rip-off products and outright scams.”