TSP offers lower-cost Nest variant

The Department for Work and Pensions (DWP) is to hold discussions with top US policy advisers over a cheaper alternative to its pension reform plans.

American think-tank chief David John, architect of auto-enrolment tool the thrift savings plan (TSP), which is due to be rolled out for qualifying US public sector workers in the next few weeks, will sit down with senior government officials in September.

The meetings are likely to coincide with a review of the cost-efficiency of the National Employees Savings Trust (Nest), as pledged by the Conservatives when in opposition.

TSP is an online system allowing employers to enrol staff into existing funds provided by a range of participating providers, including an automatic default option.

It is administered by a publicly funded body and provides access to workplace savings to certain state employees, at a significantly lower cost per head than Nest.

John called TSP “the same service as Nest without the same huge upfront expense”. He said he would take this up with the DWP and Nest Corporation, providing the latter body is established in July as scheduled.

“I have had a fair number of meetings with the DWP over the years, including within the last eight months or so,” he said. “But TSP is a relatively new development and we haven’t had quite the same level of discussion about it yet.”

Nest’s future was looking increasingly uncertain, following last week’s manifesto launch by the new government, which made no mention of the project, despite stressing the Tory/Lib Dem coalition’s commitment to maintaining its predecessor’s plan to auto-enrol staff into schemes, beginning in 2012.

In place of explicit backing for the project were vague pledges to “help reinvigorate occupational pensions, encouraging companies to offer high-quality pensions to all employees” and “work with business and the industry to support auto-enrolment”.