Splendid bit of lobbying by the financial services sector

Spotted by Bob E in The Guardian. Putting aside the fact that Nest is a huge great scam anyway...

The National Employment Savings Trust (Nest) was set up following Labour's 2008 Pensions Act to provide pensions for lower paid workers in permanent or temporary employment. Two-thirds of the UK's private sector employees do not have a workplace pension.

It was hoped companies could automatically enrol their staff into Nest unless their employer chose to make alternative approved arrangements. This in turn would provide employees with a portable, single pot of savings they could take from one job to the next. But the government withdrew proposals to introduce automatic enrolment. Even though Labour received clearance from Europe, the insurance industry claimed this would fall foul of EU competition rules.

The industry also successfully lobbied to prevent savers transferring in cash they may have built up elsewhere, allowing the pension industry to retain tens of thousands of small pots from savers and reducing the size of Nest. The restriction is not applicable to other pension providers.

Bowing further to industry pressure, the government imposed a £4,400 annual cap on the combined contributions employers and employees can make to the scheme meaning employers with staff earning above £55,000 will be forced to use additional schemes. That earnings level could be lower if an employer chooses to make more generous contributions than the statutory minimum. It makes scheme more bureaucratic for businesses. Again, other schemes do not face this restriction...

A senior Whitehall source involved in framing the legislation suggested the insurance industry "wanted to stop Nest taking in accounts from existing providers which effectively denied Nest scale", while three insurance executives confirmed the industry had engaged in a concerted lobbying offensive on this issue.

Something else that hacks me off about this whole "encouraging people to save" meme assumes that people have to choose some tax-favoured scheme and then regularly pay money into it, as if this solves all our problems. Wrong. All "saving" means is spending less than you earn in the good times so that you can spend more than you earn in the bad times (thus maximising the value of your lifetime consumption; the marginal benefit of having £1 extra to spend when you are poor is far greater than the marginal loss of spending £1 less when you are rich).

What people should do with their spare cash in the meantime is a separate issue - paying off your mortgage is the safest bet, above and beyond that, who knows? Which is exactly what the financial services sector don't want - they want people to have big mortgages which take decades to pay off and at the same time to entrust them with their "savings", i.e. they want individuals to finance their own mortgages, enabling the financial services sector to make profits on both sides of the equation.