The Government's review of NEST is now underway as part of its overall spending reforms.
The timing of the review is critical and is set to conclude just before the second part of the contract with TATA consultancy is due to be finalised for somewhere in the region of the not trivial sum of £600m.
Not surprisingly there is much talk of whether the industry could provide an alternative solution if the government decides NEST is not the way forward. Issues about interaction with means testing, concerns about the cost of administration for employers and the compliance burden falling on The Pensions Regulator all continue to be voiced but one question doesn't get raised very often and it is this.
If there are risks in the cost of administration and compliance in collecting, reconciling and passing contributions for small employers into NEST, then surely this risk remains for any other participant in the NEST target market. The issue is really that a slick technology solution to clear contributions for mobile, job changing employees remains the key. Many of NEST's individual members will be holders of either active or paid up individual pension contracts.
Perhaps allowing employers to divert contributions to these contracts through a centralised clearing mechanism would provide an equally portable solution. It would certainly reduce the number of small paid up pots that NEST is likely to end up with after a relatively small period of time, and would mean that members would have more flexibility and choice as their pots grow in future.
Worth a thought.
Steve Folkard is head of pensions and savings policy at AXA.
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