The annual contribution limit and transfer restrictions on the National Employment Savings Trust (NEST) will be removed in April 2017, the UK Government has confirmed.

Pensions Minister Steve Webb said in a written statement that this is to "ensure all businesses can be confident that this low cost and east to use scheme is among the options they can choose to enroll their workforce".

From April 2017, savers will see the annual contribution limit, which is currently set at £4,600, removed.

Webb said: "We will commence a short technical consultation on draft legislation, this autumn, to remove the annual contribution limit and the bulk transfer restrictions on 1 April 2017.

"We will also retain the option to remove the individual transfer restrictions, from 1 October 2015."

NEST chief executive Tim Jones said: "This is welcome and timely confirmation that the restrictions on contributions and transfers will be removed by 2017, particularly with automatic enrolment now starting to affect medium and smaller employers.

"Removing the cap on contributions by April 2017 means that the cap will be gone before minimum contributions increase from their current level (2%) to 5%.

"That not only simplifies things for employers, but also helps NEST members in building up their pots in the longer term. NEST remains critical to delivering the automatic enrolment policy, fulfilling its role as the provider with a public service obligation to be open to any employer to use. We now have over 1.5 million members and are working with around 9,000 employers."

Barnett Waddingham head of workplace health and wealth Damian Stancombe said: "Before the removal of these restrictions we should remember that NEST is essentially an artificial provider created by government loans that we as tax payers fund to the tune of £239m plus.

"NEST has been allowed to exist as a non-competitive entity as clearly it would distort the provider market otherwise. The removal of the contribution limit and transfer restrictions is a step towards making NEST more competitive and should therefore only be allowed if the repayment of NEST's debt to the Government is properly clarified."

First published 12.09.2014

monique_simpson@wilmington.co.uk