Grace says the restrictions should stay as long as there is a question mark over consultancy charging, because otherwise most employers will not take advice and will simply default into a Nest scheme that might not be suitable.
He says Aegon would be attacked by the FSA if it allowed workforces into a scheme it knew was not suitable for them. He singles out the Nest default fund, which is designed for risk-averse individuals more concerned with preserving their capital than seeking growth, as a particular factor that makes it unsuitable for workforces that may be defaulted into the state-sponsored scheme without advice.
He has also accused pension consultants who support the lifting of the restrictions of acting in bad faith.
On Friday the Work and Pensions Select Committee published a report calling for Nest’s contribution restrictions to be lifted now, a move that has been backed by unions.
Grace says: “The debate around consultancy charging is making it increasingly likely that many employers won’t have access to that advice. This increases the risk that employers will default into Nest even if their workforce is far from the target audience Nest was designed for.
“If Aegon, or any other pension provider for that matter, brought a low cost pension product to market that was specifically targeted at one group, with clear research backing up why it was potentially a good proposition for that group, and then allowed other people with different needs in through the back door, in the full knowledge the scheme might not be appropriate for them, we’d rightly have the FSA to answer to for selling inappropriate products. That is what treating employees and customers fairly is all about.
“Other than vested interest for commercial reasons, I cannot see how pensions ‘experts’ who should know better, can, with a clear conscience, argue for the restrictions to be removed.
“Nest’s default fund was designed based on the risk-averse profile of its target market, who were found to be more concerned about losing the value of their pension contributions than potential growth. Its design also assumes the majority of members will take an annuity at retirement. This simply isn’t the case for a growing portion of the pensions market.”
A spokesperson for the DWP select committee says: “Our very strong view, based on our original assessment, and on further clear evidence which has emerged as implementation of automatic enrolment has begun, is that the contributions cap and the ban on transfers should be lifted now, and should not be delayed until 2017.”
TUC general secretary Frances O’Grady says:
“The Work and Pensions Committee report puts even more pressure on Steve Webb to lift the unjustified restrictions on Nest.
“The restrictions are a burden on both employers and workers. Employees are being prevented from maximising their savings as they approach retirement. And employers with better-paid staff cannot use Nest as a sole scheme for their staff.
“With many more employers due to start auto-enrolling staff over the next few years the restrictions should go as soon as possible.”
