National Employment Savings Trust (Amendment) Order 2026

Lord Davies of Brixton Excerpts

Monday 13th April 2026 Grand Committee

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, this statutory instrument was laid before the House on 26 February. Automatic enrolment has been widely recognised as a major policy success, significantly increasing participation in workplace pension saving. The National Employment Savings Trust—Nest—has been central to that achievement and will continue to play a key role in supporting the system. Nest now serves 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 parliamentary approval, this instrument will amend the Nest order 2010, which provides the legislative framework under which Nest operates. The instrument will enable Nest to extend its suite of retirement options to include flexi-access drawdown, a retirement income option that allows individuals with a defined contribution, or DC, pension to withdraw any amount from their pension pot while keeping the remaining funds invested. The instrument will also enable Nest to offer a scheme pension—an income payable to a member either directly by the scheme administrator or through an insurance company appointed by the administrator. This provision allows Nest the flexibility to offer the same range of benefits which can be provided by other comparable pension schemes.

In addition, the instrument will provide Nest with the authority, in the event of a member’s death, to enable the trustee to offer either a dependants’ scheme pension or a drawdown pension to eligible individuals including dependants, nominees or successors. This provision will ensure flexibility in benefit options after death and again aligns Nest with broader industry practice and capabilities.

Overall, this amendment will allow Nest to expand the retirement offer for its members, aligning it to the same range of benefits that other pensions schemes can offer and supporting it to comply with the guided retirement requirements recently debated during the passage of the Pension Schemes Bill.

We know that retirement today is not a linear experience and that circumstances change over retirement. Life events—including decisions to work part-time, health conditions and bereavement—all factor in and have an impact on household incomes. Gathering insight and feedback from members is crucial to designing well-structured and flexible pension plans. These changes reflect the needs and preferences of Nest members. This instrument will support the important role Nest plays in the pensions market by enabling it to provide appropriate retirement solutions for Nest members.

Automatic enrolment has encouraged more people to save for their retirement and has made saving normal for most people in work. But getting people saving is just the start and, as we know, people need support when they come to use their savings to provide an income in retirement. Currently, Nest members can use their pension savings to buy an annuity, make use of the uncrystallised funds pensions lump sum facility, take the savings as cash or transfer out to another scheme. However, since Nest’s inception, retirement options have expanded across the pensions market, particularly following the introduction of the pension freedoms in 2015. These flexibilities are not fully available to Nest, which remains constrained by the terms of its original order.

As noble Lords will know, the Pension Schemes Bill contains specific measures around guided retirement. A consultation document, Helping Savers Understand Their Pension Choices: Supporting Individuals at the Point of Access, was published in July 2023 under the previous Government. This asked a specific question about whether Nest should provide default pensions to its members. There was broad support from the 46 industry and member groups that responded, recognising Nest’s unique role and the importance of ensuring fair treatment in line with other schemes, while being clear that Nest should not gain any commercial advantage.

Since that consultation, the Government have continued to engage extensively with Nest and the pensions industry to ensure that that principle of fairness, both to Nest members and to the wider market, has been upheld. Industry players have been active in developing solutions ahead of the guided retirement requirements. For example, in June 2022, the PLSA, now Pensions UK, published Retirement Choices: the Evolution of Products and Support, which set out its framework to support complex decision-making.

Without this change, Nest, the largest master trust, will not be able to offer flexi-access drawdown, nor will it be able to meet fully the expectations of guided retirement—to provide savers with the option of a simple, dependable default income in later life—and Nest savers would therefore miss out on a secure default pension option. With cost of living pressures rising, I am sure the Committee can agree that having a dependable retirement choice is more important than ever. I commend this statutory instrument to the Committee.

[Lord Davies of Brixton (Lab)]

I welcome the Government’s decision to bring in this draft order. As my noble friend the Minister has made clear, it builds on the clear success of automatic enrolment and Nest as the public service vehicle for automatic enrolment contributions. It is a crucial element in achieving the Government’s aim, set out in the pensions road map, of ensuring that people get as much out of their savings as possible. In other words, structure is as important as adequacy. Enabling Nest to offer flexi-access drawdown and a scheme pension to its members is an important step, and it brings Nest in line with what other occupational defined contribution schemes have been able to offer.

I want to explore what the order does not necessarily make clear and ask the Minister whether the Government have considered whether more might be done. I will focus on the potential role for Nest in providing collective defined contribution pension schemes. Put simply, as noble Lords know, CDC arrangements pool the risks involved in providing pensions rather than leaving each individual to manage that risk alone. The issue I wish to raise is whether Nest, under the powers conferred by this order, would be legally enabled to offer CDC-type benefits as part of its retirement income proposition.

The order amends Article 32 of the National Employment Savings Trust Order 2010, so that in addition to lump sums and lifetime annuities, the trustee may pay drawdown pensions and scheme pensions. The term “Scheme pension” is defined by reference to paragraph 2 of Schedule 28 to the Finance Act 2004. That definition is broad. It encompasses a pension payable by the scheme administrator directly, without the interposition of an insurance company. That is significant. A CDC scheme under which the trustee pays a pension directly to members from a pooled fund, applying mortality credits as members of the pool die and their share is redistributed to survivors, would appear to fall within the concept of a scheme pension as defined in the regulations and the Act. I ask the Minister to confirm that interpretation.

This is not a fanciful proposition; Nest contemplated precisely such an arrangement in its 2015 blueprint document, The Future of Retirement. That document set out a three-phase retirement income strategy. The third phase, for members aged 85 and beyond, was to be funded through what the document called a

“later life protected income building block”.

Crucially, the document explicitly considered the operation of this building block through a collective uninsured mortality pool—members pooling their longevity risk with the trustee distributing income proportional to the premiums paid in, supported by mortality credits as the cohort reduces. This is, in effect, a collective defined contribution scheme for decumulation. In other words, Nest was ahead of the curve in 2015. The question is whether this order now places the legal architecture beneath those ambitions.

Concurrent with these regulations, Nest is undertaking a consultation of the changes to its rules it will be able to make in line with the order. That consultation focuses principally on the mechanics of flexi-access drawdown, the drawdown account and the relationship between the pension account and drawdown account, the transfer provisions and the death benefit arrangements. That is all necessary and commendable work, but the consultation is candid on the fact that there are no immediate plans to offer a scheme pension. The relevant rule amendment provides only that

“if and to the extent that the Trustee determines to provide the option”,

a scheme pension may be made available.