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Aegon chief Grace forecasts a perfect storm in the workplace
by Alex Steger on Feb 21, 2013 at 13:39
Auto-enrolment may have made the workplace pension market a potential gold mine for providers and advisers, but it could become the scene for another huge mis-selling scandal, according to Aegon UK chief executive Adrian Grace (pictured).
Grace is concerned that a possible clampdown on consultancy charging, combined with lifting restrictions on the National Employment Savings Trust (Nest), could result in millions missing out on advice and being put into unsuitable pensions.
This ‘perfect storm’ would be bad news both for consumers and for the already fragile reputation of financial services, said Grace.
‘Corporates need advice to help them [select a pension], but without consultancy charging they won’t get advice and will default into Nest, and as a result, people will end up with bad retirement products,’ he said.
‘You can see the perfect storm. In 10 years’ time people will ask: “Why did all those people go into Nest?” And the answer will be: “Because they didn’t get advice and had something forced on them they didn’t want.” Isn’t this the same old scandal where people have not been given the right advice and [they have] bought inappropriate products?’
Lifting restrictions on Nest
Under the terms of its government loan, Nest operates with bans on transfers in and out, and a contribution cap of £4,400 for 2012/13, although this will rise in line with earnings.
Grace’s views on Nest come as experts, MPs and other providers are falling over themselves to call for the restrictions to be lifted.
Those arguing to lift the restrictions say the transfer ban must go for the government’s proposed pot-follows-member reform of the small pot pension regime to be effective.
They also argue the contribution cap should be removed to encourage employers to use Nest and for the scheme to be competitive and pay off its government loan.
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