If automatic enrolment was a marathon (and it certainly isn’t
a sprint), we would be hitting the four mile mark around about now. And so far,
so good. Everything seems to be going swimmingly. Employers have planned,
implemented, and complied – with the help of their HR department, consultants,
and advisers. The incredibly low opt out rate of 10% is dazzling. Steve Webb and his DWP gang must be leaning back with a
smile on their faces.
This week we learnt Nest has signed up 100,000 members.
Great news. But not as good as the 250,000 members Legal & General have
signed up to their master trust. Despite Nest insisting all is OK, and it is
on track to meet its grand masterplan, some are saying this is a disaster for the
Government-sponsored scheme and action needs to be taken quick. That action
being to remove the transfer ban and contribution limit.
Excuse me if I don’t join in this wringing of hands in
despair, but I don’t think this is a major catastrophe. Nest was set up with a
very specific purpose. To help the employers the rest of the market couldn’t –
or wouldn’t want to – reach. (And not necessarily to provide the cheapest
charges as some have argued.) So far we are only at the beginning of automatic
enrolment, and the schemes up for grabs have been provided by big multinational
employers. The sort of employers almost all providers are happy to ‘reach’ and
have on their books.
Roll on 18 months, and I can guarantee that the member
numbers on Nest’s book will be swelling, whilst L&G (and other providers)
will have withdrawn somewhat from the fray and the fighting for schemes.
So to talk about disaster and removal of limits is
premature. It may be that the transfer ban has to be lifted to implement the automatic
transfer of small pots. But it shouldn’t be removed purely because Nest hasn’t
secured as many big schemes as it wanted to. Let it instead start to
concentrate on its true market – the small employers who will need every ounce
of help Nest and others in the industry can give.
