Draft National Employment Savings Trust (Amendment) Order 2026
(1 day, 6 hours ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
I beg to move,
That the Committee has considered the draft National Employment Savings Trust (Amendment) Order 2026.
It is a pleasure to serve under your chairship, Ms Jardine. The draft order was laid before the House on 26 February 2026. Automatic enrolment is a major policy success that has substantially increased workplace pension participation. The National Employment Savings Trust has been central to that progress and remains critical to the system’s continued effectiveness. NEST now supports nearly 14 million members, around one third of the working-age population, providing a low-cost, accessible pension scheme for employers and workers across the UK.
Subject to Parliament’s approval, the draft order amends the National Employment Savings Trust Order 2010, which sets out the legislative framework for NEST’s operation. The amendment will allow NEST to expand its retirement options to include flexi-access drawdown. FAD is a retirement income option that allows individuals with a defined contribution pension to withdraw any amount from their pension pot, while keeping the remaining funds invested.
The draft order also enables NEST to offer a scheme pension paid directly by the scheme administrator, or through an appointed insurer, and it gives the trustee authority on a member’s death to provide a dependant’s scheme pension or drawdown pension to eligible individuals, including dependants, nominees and successors.
Together, these measures give NEST the flexibility to offer a full range of retirement and post-death benefits consistent with other major pension schemes and wider industry practice. The Pension Schemes Bill includes guided retirement measures that will require pension schemes to design and make available default pension plans with a sustainable income for the majority of savers. The reforms made through this amendment will ensure that NEST can deliver on those expectations and provide its members with a level of choice, flexibility and support comparable to those of other large-scale providers.
NEST members currently have three main options at retirement: they can buy an annuity; take an uncrystallised funds pension lump sum; or take their pot as cash or transfer to another provider. Since NEST was created, we recognise that pension freedoms have transformed the market. Savers elsewhere can access a far wider and more flexible range of retirement choices—flexibilities that the 2010 Order prevents NEST from offering. As a result, 14 million NEST members are left with fewer in-scheme options than those in comparable pension arrangements elsewhere, which cannot be right or fair.
In the 2023 consultation, “Helping savers understand their pensions choices”, most of the 46 industry and member groups that responded supported allowing NEST to provide default pension options. They recognised NEST’s scale and unique role, and they agreed that its members should receive fair and equivalent treatment, while also being clear that NEST should not gain any commercial advantage. Since the consultation, the Department for Work and Pensions has worked closely with NEST and the wider pensions industry to uphold the principle of fairness.
That work culminates in the amendment before us today, which will allow NEST’s 14 million members to benefit from modern, flexible retirement choices, without distorting competition across the market. Without this change, NEST—as the largest master trust in the country—would be unable to offer flexi-access drawdown or fully meet the expectations of guided retirement, including providing the vast majority of its members with a simple, dependable default income in later life. That would fall hardest on NEST members, many of whom are lower-paid workers, and therefore most in need of secure and straightforward retirement income options.
I am sure all Committee members would agree that we cannot allow that group of savers to miss out on a safe, dependable default pension income, particularly at a time when rising cost of living pressures make a reliable and predictable retirement income more important than ever. I commend the draft order to the House.
Mr Peter Bedford (Mid Leicestershire) (Con)
It is a pleasure to serve under your chairmanship, Ms Jardine. As with many areas of Government policy, there is a degree of consensus across the House; the draft order is no different, and the official Opposition will not oppose it today.
Auto-enrolment, alongside the creation of NEST, was an obvious achievement of the Cameron Government. It marked a fundamental shift in how people across the country look at retirement, encouraging millions to save and take long-term financial planning seriously. The liberalisation of one of the NEST pension schemes by enabling flexi-access drawdown is a logical next step. It aligns with the broader principle of pension freedoms introduced under previous Conservative Governments and represents a positive development for workers and savers within NEST.
However, I would like to take this opportunity to raise a few points with the Minister. First, the pensions industry is uncomfortable with the significant use of secondary legislation in the Pension Schemes Bill, but we are where we are with that. Secondly, as I have touched on, the official Opposition strongly support the principle of pension freedoms. With that in mind, will the Minister revisit previous amendments tabled by Conservative Members that would allow greater access to pension savings for the purpose of obtaining financial advice? Perhaps even more radically, will he introduce the sidecar savings pot discussed during consideration of the Bill? People under the age of 57 sometimes fall back on that in hard times.
Finally, while reforms to promote pension freedoms are a positive step, the situation ultimately depends on the adequacy of savings and investment performance. Where individuals have not saved enough or where returns have fallen short, those freedoms risk offering a limited practical benefit. Could the Minister update the House on what steps the Government are taking to increase auto-enrolment contribution rates, and will he give a clear assurance that the Government will not use the so-called “reserve power” in the Pension Schemes Bill in a way that prioritises public finances at the expense of individuals’ pension pots?
The Opposition will not be opposing the statutory instrument, but I emphasise that cross-party co-operation has long been the foundation of successful pensions policy. I urge the Minister and his colleagues to listen to Opposition parties and the industry to reconsider the inclusion of any form of mandation clauses in the Pension Schemes Bill.
Daisy Cooper (St Albans) (LD)
Broadly speaking, the Liberal Democrats support this measure. However, we note that an assessment by the Department for Work and Pensions suggests that 77% of NEST members are likely to change their behaviour: a huge number of people will be looking for advice.
As the Minister will be aware, one of the many amendments tabled by the Liberal Democrats to the Pension Schemes Bill called for free, impartial advice to be made available to those people when they are looking at their pensions and other issues. I invite the Minister to say a few words on whether the Government believe that the guidance infrastructure is sufficient for the members of this scheme and others to access the free, impartial advice that they need when making such big decisions.
Andrew Western
I welcome the broad support from both colleagues who have spoken. I was surprised that the hon. Member for St Albans resisted the temptation to point out that describing the coalition Government as the Cameron Government when things are positive is a particularly interesting tack; I credit Steve Webb for a lot of the positive work on auto-enrolment and broader pension changes.
On the FAD changes, I welcome the Opposition spokesperson’s support. This is an important set of changes, and I am delighted that he is supporting them—not least because his Government consulted on the issue back in ’22-23. Given the broad support, I think we can all agree that this is an overdue change. It is one that I welcome.
On the question of the use of secondary regulations and the concern that the industry has in that regard, I will take that on the chin: the industry is making a fair criticism and we will engage with it on that. On the particulars of this change, as a result of the consultation we know that the industry is broadly content with what is proposed here; I hope that that is part of the reason why the Opposition has determined not to oppose these changes.
On the question of revisiting previous amendments, including the Liberal Democrat one, we will not be looking to reverse previous decisions that the Government have made—the shadow Minister is clearly doing his job in asking us to do so—and that includes decisions on mandation changes.
Lincoln Jopp (Spelthorne) (Con)
If we are going to offer flexi-access drawdown, does the Minister agree that it would be better if members of defined contribution schemes had greater awareness of what their pension schemes were invested in? The latest research suggests that more than 50% of people in DC schemes do not know what they are invested in. To make informed decisions, does it not behove all pension fund holders to make themselves aware of what they are invested in?
Andrew Western
I suggest that it is always good practice for an individual to look at how their pensions and other investments are invested. I am more than happy to ask the pensions Minister, my hon. Friend the Member for Swansea West (Torsten Bell), to come back to the hon. Gentleman on the specifics of whether we are looking at any work in this space to enable people to have greater access to that information. It is best if I take that question away and come back.
It is also best if I come back to the hon. Member for St Albans on her question about behavioural change. As the hon. Member said, 77% is a significant number when we are talking about 14 million members. Guided retirement sets out the principles and framework for how schemes should support the vast majority of members with the big decisions as they move into saving for retirement. We will clearly need to do a range of work to ensure that proper support is available in the necessary amount, but I will ensure that she receives an update on the specific activities that the Department is undertaking to move us forward in that regard. It is a reasonable question, and I will ensure that she gets a detailed response.
The amendment itself simply enables NEST to provide for the accumulation options required to deliver on the broad principles of the changes that we are seeking to make. Given the overall support for the measures, I commend the instrument to the Committee.
Question put and agreed to.