Kate Smith, head of pensions at Aegon comments on the Government’s response to its consultation ‘NEST – Evolving for the future’ “We welcome the Government’s decision not to build an in-house decumulation solution as this would have been premature while the private sector market is still developing. Only two years on from the pension freedoms, the market is still young and is already innovating to deliver retirement solutions to all sectors of the market. Currently NEST members’ pension pots are very small, and this is likely to be the case for some time. For the foreseeable future, most members will seek to cash in their NEST pots rather than buy a retirement income product such as drawdown or an annuity, unless they have pension savings elsewhere.
“The government will continue to monitor market developments, but we strongly believe that rather than NEST building its own retirement income solution at taxpayers’ expense, it should capitalise on existing pension provider expertise. It could do this by setting up a panel of providers offering a suite of retirement income options, including drawdown, drawdown with guarantees and annuities, allowing members to access the best in the market.
“From April, there will be relaxation in NEST rules including the removal of the contribution cap, and allowing it to make and receive transfers. No further significant changes should be made to NEST until it reaches its breakeven point and is less reliant on the taxpayer.”
Gareth Evans, Head of Corporate Affairs at Royal London, commented:“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.
“Given its state subsidy, NEST should not be able to enter a functioning, evolving market on unequal terms. Any such move would be market distorting and should be avoided. NEST resources would be better deployed signposting to a source of impartial guidance and advice for their members who are seeking a competitive retirement income plan.”
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