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Experts say Govt will not lift Nest restrictions despite MP pressure

Anne Begg

Pensions experts doubt whther the Government will lift Nest restrictions despite mounting pressure consumer groups and MPs.

In its report into lifting Nest restrictions, published this week, the work and pensions select committee says all restrictions on Nest must be lifted immediately for auto-enrolment to work successfully.

The scheme currently limits members to annual contributions of £4,400 with no transfers in or out allowed in order for Nest to focus on its target market of lower-paid employees.

In November, the Government launched a call for evidence on Nest’s restrictions following calls to scrap them ahead of a planned reviewin 2017.

The WPSC report argues that employers are deterred from using Nest because it is not available to higher earners while employees face greater complexity through itslimitations.

It also sets out the argument that Nest could pay back the Government more quickly if it could service these higher earners.

The report states: “We see no justification for continuing to inhibit Nest by persisting with these restrictions, which risk preventing Nest from using taxpayers’ money most effectively and which disadvantage both employers and employees.”

This is the second time the WPSC has called for the restrictions to be scrapped.

In its 2012 report into auto-enrolment, published in March, the WPSC called for an end to Nest restrictions as a “matter of urgency”.

But Hargreaves Lansdown head of pensions research Tom McPhail says the Government will need to see market failure before it changes the rules.

He says: “Anyone with an objective view can see that it will be in consumers’ best interests generally for those restrictions to be lifted as soon as possible.

“But I do not think the Government will be in a position to heed the calls to lift the restrictions straight away.”

Wingate Financial Planning director Alistair Cunningham says: “From an employer’s perspective you could run a two-tier system, with Nest for the vast majority of employees and another scheme for higher earners who are more likely to take advice.

“For the target market of low to middle earnings, I do not have any issue with the restrictions at all.”

The report also highlighted the importance of lifting Nest transfer restrictions on transfers if the Government’s “pot follow member” plans are to be successful.

A DWP spokesman concludes that it welcomes the WPSC’s contribution and will publish the results of its consultation in the spring.


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