UK - Delays to the rollout of auto-enrolment will not damage the National Employment Savings Trust's (NEST) position in the market, its chairman of trustees has told a parliamentary hearing.

Addressing a work and pensions select committee hearing on automatic enrolment, Lawrence Churchill refuted claims by committee chair Dame Anne Begg that the delayed staging dates for small and medium-sized enterprises (SMEs) would allow other providers to "undercut" the government-backed scheme.

Churchill stressed that the delay was only a year and said that pensions minister Steve Webb had been "firm" that there would be no further changes to the timetable.

He added that the delay would not introduce further competition, as the customers coming within NEST's target market fell outside that of traditional pension providers.

Tim Jones, the scheme's chief executive, added that none of the current providers wished to take on NEST's public service obligation - under which no employer can be turned away - and said its role was therefore important "to get us to the wonderful place Australia has got to", whereby universal pension coverage had been achieved through compulsion.

The committee further questioned how the changed staging dates would affect the scheme's repayment of state aid - used to cover all launch costs - with Churchill saying that new, "quite complex modelling work" on both the repayment schedule and the delay's impact on opt-outs and total member uptake would be concluded early in 2012.

Asked if the proposed review of NEST should still go ahead as scheduled in 2017, or if the time table should be either brought forward or delayed to account for revised staging dates, the chairman said that was "entirely a matter for government".

The issue of restrictions placed on the auto-enrolment scheme was also raised, with Jones saying that the annual contribution limit dictated by government served to "focus" all aspects of plan design, but that the contribution cap was the "least favourite" part of his role.

However, Churchill was more critical.

"It's difficult to see how the restrictions are in the members' interest," he said. "Everyone has agreed the restrictions should go."

He added that the restrictions were now "impeding" its access to the stated target market of low-income employees without a pension, as many worked for larger companies that would see higher-earning workers requiring a top-up arrangement when contributions exceeded £4,400 (€5,240) a year, or if qualifying earnings exceeded £33,540.

Churchill likened the approach taken to using "a sledgehammer to crack a nut".

Jones went on to defend NEST's fee structure - comprising an annual management charge (AMC) of 0.3% and a contribution charge of 1.8% - with income from the latter used to pay back state aid.

Asked whether it would not serve the scheme to combine both the AMC and contribution charge into a single fee, he disagreed, adding: "We are absolutely committed to clarity and transparency in communicating our charge structure."

He said trustees would be likely to drop the 1.8% charge once the government's loan had been paid back, increasing the scheme's competitiveness.

Questions were also raised over criticisms that NEST's investment strategy was too cautious.

Chief investment officer Mark Fawcett argued that their investment approach - with the foundation period only targeting an outperformance of the consumer prices index by 3% - was justified.

"The very strong message we got from our potential members is you've got to manage risk," he said, arguing that the foundation period was not low-risk, and that it was simply important for the fund to understand its future members' risk appetite.

Fawcett added that the scheme was not looking to pursue a strategy of market timing, as this was "really hard" to do well.

Instead, his approach was to manage members' investment risk as best possible.

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