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Failure is not an option
NEST has been accused of being in breach of regulatory guidance on opt-outs, but the devil will be in the detail
The National Employment Savings Trust’s (NEST’s) proposal to allow opt-outs over the telephone has drawn criticism from some quarters of the pension industry who accuse it of breaching Pensions Regulator rules.
NEST’s website currently states: “We’re designing the process so that if you choose to use NEST, workers can opt out online or by using our interactive telephone service.”
The case for using low cost methods to facilitate opt-outs is a compelling one for a provider whose model is built on delivering good value at bargain prices. But if the aim of the auto-enrolment regime is to capture the benefits of inertia shouldn’t providers be trying to make it harder, not easier, to opt out? No one wants to see the telephone equivalent of piling opt-out forms by the photo copier. And shouldn’t NEST be pioneering the new regulations rather than seeming to devise a tick-box exercise that flies in the face of the opt-out process?
Simple telephone opt-outs would not appear to comply with existing auto-enrolment regulations, which mean an opt-out notice has to be signed by the jobholder or otherwise verified if sent electronically. At the very least the content of a telephone call could be disputed and such a process might even leave itself open to abuse by unscrupulous employers.
In its defence, NEST says speculation about its approach to electronic opt-outs by different channels has been made without critics having seen its processes, which it is developing currently.
It goes on: “NEST members will be able to opt out electronically, via both website and telephone. We are very confident our processes will be in line with the legislation as well as The Pension Regulator’s guidance. In particular, whichever way members choose to deal with us, we will ensure they are made aware of the consequences of opting out and that we have confirmed their identity.”
The fuss won’t die down until NEST publishes the full detail of its opt-out process, although it is unclear whether NEST’s intentions have been misinterpreted, or whether the provider is back-tracking on its initial idea.
At a recent industry conference, pensions minister Steve Webb said it could be counter-productive to place too many obstacles in the path of those wishing to opt out. Certainly from a politician’s point of view, a government could rapidly become unpopular if apparently non-compulsory retirement saving appeared to be mandatory just because opting out was such a hassle. Be transparent and honest with the public and opt-ins will be higher, says Webb.
One can see why a provider might want to make it easy to opt out as this would mean its auto-enrolment product would be more attractive to potential clients; finance directors of course would be more than happy if there are high opt out rates. But that would also leave providers shooting themselves in the foot as high opt-out rates will leave them with fewer assets under management.