With two-thirds of the UK’s private sector not having a workplace pension, news that pension plans designed to help the lower paid save for retirement have been diluted comes as a blow.
Sources have revealed that the not-for-profit scheme, which is due to come into force in October and be phased in over six years, has had restrictions placed upon it after intense lobbying by the insurance industry, which appears to be fearful of the competition.
The existing National Employment Savings Trust (Nest) was set up to help employers enrol staff into it unless they chose to make alternative approved arrangements. The accrued ‘pot’ could then be transferred from on employer to another.
However, the Government has watered down proposals to introduce automatic enrolment into Nest, as the insurance industry has claimed this would contravene EU competition rules because Nest is funded by a multi-billion pound Government loan, which could be viewed as an unfair subsidy.
Pensions Minister Steve Webb has said he would be willing to remove the restrictions but has warned that moving too quickly could provoke a legal challenge from pension providers.
Mr Webb said in a Commons debate: “If we plough in there and got a legal challenge from a provider we would be stuck in the courts for 18 months. That would not be helpful. The political will is there that Nest does its job and we are considering the best way to do that.”
Dr Ros Altmann, Director General of the Saga Group, said: “These (restrictions) mean that Nest cannot be in most cases the only pension provided. If an employer wants to cut down administration you can’t go to Nest and say ‘Please do it’.”
However, the Association of British Insurers said: “We refute any suggestion that we tried to neuter Nest. In fact, we support the purpose of Nests. Like the government we want to see increases in pension take-up in this country, particularly for those on lower incomes.