Mercer has broadly welcomed proposals to allow the National Employment Savings Trust (NEST) to develop services that would allow its members to access a wider range of options on retirement, as permitted by the recent pensions reforms.
However, in its response to the Department of Work and Pensions’ recent consultation Mercer questions whether developing decumulation services for its members would actually be the best use of NEST’s resources at this time.
“We see no reason to prevent NEST from providing its members with decumulation products and services in the future,” says Brian Henderson, partner at Mercer. “However, as most NEST members have yet to build up enough funds to make drawdown a viable option it is probably too premature and not in members’ best interests at this stage. More clarity is also needed on where the funding for developing such products and services would come from.
“For the time being NEST’s focus should remain, very strongly, on ensuring individuals build up meaningful levels of pensions savings to help improve retirement outcomes. Importantly, it should work to educate and encourage members to increase their contribution rates over and above minimum mandatory amounts.”
Mercer’s response also highlights the current “collegiate” relationship that NEST has with the rest of the pensions industry, with most specialist advisers freely giving their time and input to help NEST along with its thinking.
Henderson points out that this would be unlikely to continue were NEST to start being seen as a direct competitor as opposed to a “provider of last resort".
Henderson says: “The consultation laid out a good list of principles but they should not necessarily carry the same weight. Most important, for a scheme with NEST’s member profile, is providing value for money.”