The annual contribution limit and transfer restrictions on the National Employment Savings Trust (NEST) will be removed from 2017, the Government has announced.
Inits response to the Department for Work and Pensions' (DWP) call for evidence on the impact of the restrictions on NEST, the Government said that it found a perception that the constraints were stopping NEST from serving its target market.
By lifting the constraints from 2017, DWP said that employers will be certain that NEST will remain a suitable pension scheme for their workers when minimum contributions rise to 8%.
Pensions minister Steve Webb said: "With over 250,000 members already, it is clear that NEST is a success. Targeting low to moderate earners that the market has traditionally forgotten, NEST has innovated with its use of language and investment strategy and has ensured that everyone has access to quality pension provision.
"That is why I am not making any changes until 2017, when automatic enrolment is fully rolled-out. At this point I will lift the contribution limit so that NEST remains a force for good in the marketplace, driving up standards and best practice.
"The position on bulk transfers is much the same. As huge numbers of employers gear-up to start to enrol their workers, we need NEST to focus on getting these people in to pension saving. Once this is achieved and the market is established, the restrictions on bulk transfers will be lifted."
NEST welcomed the Government's plans and said that it provided certainty for employers and members.
Helen Dean, NEST managing director or product and operations, said: "We are pleased the Government has decided that from 2017 members and employers will be able to use NEST as they would any other pensions, with no specific restrictions on the amount they can contribute or the ability to transfer in and out."
She added: "NEST continues to focus on our target market as we always have done."
The National Association of Pension Funds (NAPF) chief executive Joanne Segars said that the changes to transfer rules and contributions are "sensible".
Segars said: "NEST has an important role to play in making auto-enrolment a success, and it should not be held back from doing so.
"There might have been a case for listing these barriers earlier, but doing so from 2017 provides the clarity and certainty that employers, savers and the pensions market all need."
Neil Carberry, CBI director for employment and skills, also said that the Government made a sensible decision by sticking to its original timeline.
However, Towers Watson senior consultant David Robbins said: "It's hard to justify keeping this limit for another four years based on what is in individuals' or employers' interests. There are two obvious reasons why the Government may have decided not to scrap it straight away.
"The first is that the European Commission cited the restrictions when approving the taxpayer-subsidised loan that NEST receives: the Government knew that any decision it took could be challenged by NEST's competitors and may have preferred announcing a compromise it thought everyone could accept to kicking off a period of uncertainty.
"The second is the capacity crunch amongst pension providers. The Government appears to think that this could be more damaging if NEST's attention became more focused on employers who other providers will in any case not turn away. "
First published 09.07.2013
monique_simpson@wilmington.co.uk
