Strong private-sector challenges are emerging to a government scheme designed to get millions of British workers saving for retirement.
Last week, the Danish firm ATP announced that it will be launching a new low-cost workplace pension called "Now: Pensions" for British employees to coincide with the advent of auto-enrolment next year.
This means that Now: Pensions will go head to head with the government-sponsored Nest pension scheme. From next October, millions of British workers who are not members of a company pension scheme will be auto-enrolled into Nest or the existing company pension scheme. Employees and their employers will have to contribute a percentage of salary into a Nest pension pot.
It was expected that Nest would become the main vehicle for these workers. However, Now: Pensions' parent company, ATP, points to its experience of managing 4.6 million workplace pensions in its home country of Denmark. Charges will be very low, with ATP promising a monthly administration fee of £1.50 and an annual charge of 0.3 per cent. According to Tom McPhail, pensions expert at independent financial advisers Hargreaves Lansdown, ATP may have the drop on Nest as far as charges are concerned. "These are very competitive, and perhaps on higher-value schemes even slightly better."
It seems Now: Pensions is not the only challenger: this week B&CE will outline its own alternative and it's rumoured that the Federation of Small Businesses will get in on the act. As a result, Nest might not hit its target. "If they attract, say, only a million people into Nest, there are going to be some painful conversations with those providing the investment schemes that Nest money is to be put into and with the Treasury," Mr McPhail said.
However, Nest senior executives seem sanguine about the competition. "You'd expect a bigger market to attract new entrants and we welcome this, especially if it improves outcomes for pension scheme members. We still expect there to be between two and five million Nest members by the end of September 2016," said Tim Jones, chief executive of Nest.Reuse content