Govt grants Nest £329m safety net

Nest has been granted a contingent liability guarantee of £329m by the government in respect to its master trust authorisation application.

The safety net was requested by The Pensions Regulator (TPR) in order to fulfil the master trust criteria outlined in the Pension Schemes Act 2017, which introduced a new authorisation and regulation regime for these schemes.

In a written statement to Parliament, Pensions Minister Guy Opperman stated: “One of the criteria is that the scheme must be financially sustainable and that in the event of a triggering event, an event that would put the scheme at risk of needing to wind up, the scheme must hold sufficient financial reserves to cover its gradual closure without putting these additional costs onto the scheme members.”

Nest is funded with taxpayer money through a government loan and holds no financial reserves, therefore TPR, who oversee the authorisation process, has suggested a ‘Letter of Comfort’ from the government could provide a solution.

Commenting on the announcement, Hargreaves Lansdown head of policy, Tom McPhail said: “The good news for pension savers is the new regulatory regime is clearly no walk-over, with some schemes choosing to close down rather than attempting to comply.

“The scale of the potential liability for Nest is pretty eye-watering though, even in light of the fact they are the largest master trust in the UK.

“This news reinforces the expectation we’re going to see significant consolidation in this sector. It is also going to raise questions from some competitors regarding the scale of the subsidy provided to NEST and how this sits with state aid regulations.”

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