Peers thrash out Nest reform

Lord McFall, author of last year’s Workplace Retirement Income Commission report, called a House of Lords debate to reiterate the document’s call to do away with a £3,000 maximum annual contribution to Nest and to allow cash from other pots to be moved into the scheme.

He was backed by most speakers, including Nest trustee Baroness Drake and former financial services minister Lord Myners.

Pensions minister Steve Webb told PW he wants to see more evidence the two policies are significantly hindering Nest, although privately he is believed to be sympathetic to reversing both before their existing 2017 review date.

Only former pensions minister Lord Hutton, who set the current government’s policy for public sector pension reform, spoke out against the plan.

McFall, a Labour peer and ex-chairman of the House of Commons Treasury Select Committee, said the government should “remove the shackles on Nest”.

He added: “The cap and transfer-in rule are preventing the best outcome for institutional savers and government.”

Myners criticised the Department for Work and Pensions’ preferred policy for transfers of pots following employees who move jobs. This is currently subject to public consultation, which says it would cost firms more, pushing charges onto savers.

“Quite frankly, the private sector is not very interested in aggregation of small balances, so there is no obvious market for that,” he said. “It is very much a seller’s market.”

And Drake acknowledged her partiality as a Nest employee, before telling the Lords: “We are now finding they add complexity to the Nest product rather than simplicity to the employer experience.”

But Hutton urged Webb not to introduce changes until the policy in its existing form had been given time to bed in.

“My advice to the minister is not to tinker with the framework,” he said. “That has been one of the enduring problems with pension law and its reform; we have never allowed the dust to settle on any of the reforms we have introduced.”

Lord Freud, government work and pensions spokesman in the Lords, pointed to the small pots consultation but indicated the rules could be revisited before 2017, promising to
keep them “very much under review”.