The Department for Work and Pensions (DWP) has issued a call for evidence on the impact of two statutory constraints on the National Employment Savings Trust (NEST).

The Government is seeking views and evidence on whether the annual contribution limit and transfer restrictions on NEST are influencing employers' choice of automatic enrolment scheme in a way that was not intended.

NEST has a public service obligation to ensure that everyone eligible for automatic enrolment can access a low-cost pension scheme. It has been designed to target low to moderate earners, smaller employers and firms with a high turnover of staff who were not served by the existing market.

Steve Webb, Minister for Pensions said: "We are already seeing the positive effect that NEST is having on the world of pensions. Workers are being signed up for workplace pension schemes at much lower charges than in the past and firms have much more choice of provider than in the past.

"But we need to make sure that this continues as automatic enrolment moves on to smaller firms and that the constraints on NEST are not a barrier to good consumer outcomes"

The Work and Pensions Select Committee recently concluded that the annual contribution limit and the transfer restrictions on NEST may prevent the not-for-profit scheme from servicing market failure. At the time the Committee recommended that the Government should remove them.

But the evidence available is not conclusive, says the Government and it doesn't want to propose any changes "without understanding their impact".

The National Association of Pension Funds (NAPF) welcomed the consultation. Darren Philp, NAPF director of policy, said: "We are pleased that the DWP is looking into the possibility of removing the restrictions on NEST.

"The economic landscape has changed significantly since the auto-enrolment reforms were legislated so there is a case for reviewing the restrictions if the evidence shows they are acting as a barrier for employers wanting to use NEST or for employees getting value for money. Other requirements on NEST which limit its ability to compete with other providers in the market, such as its public service obligation to serve all employers, will remain in place.

Philp said that NEST was "a key part of the UK savings picture going forward" and that the NAPF was committed to seeing it be a success.

Morten Nilsson, CEO of NOW: Pensions, also commented the consultation saying that although NEST was initially set-up to ensure the lowest-paid workers had the opportunity to save for retirement, at a time when "private providers had shown little interest in lower-income earners", the market has developed considerably since then and many other providers have now entered the market targeting a wide range of employee groups.

He said: "We as one provider offer pensions provision to all employers and employees, regardless of size or income. It's essential for auto-enrolment providers to be on the same page and work to ensure auto-enrolment is a success for all involved; changing the face of the pensions industry over the long term to ensure everyone has access to income on retirement."

First published 06.11.2012

azeevalkink@wilmington.co.uk