The Government could scrap the annual contribution limit for Nest amid concerns it will not be effective in meeting the scheme’s policy intentions.
An email from the ABI to its members, seen by Money Marketing, reveals officials at the DWP are “under pressure” to reconsider the £4,200 annual limit as the scheme prepares to accept contributions from a small group of voluntary employers this summer.
It says: “As a result of recent press coverage, the DWP now feel under pressure to look again at the Nest contribution limit.
“The annual limit is designed to focus Nest on its target market of individuals who the existing industry currently finds it difficult to serve, therefore complimenting rather than replacing existing provision.
“The DWP is concerned that the limit will not be effective as it could be in achieving the policy intention and would like feedback.”
Under current plans the contribution limit will be reviewed annually in line with average earnings.The Government will then look at removing the cap completely in 2017.
A DWP spokeswoman says: “We accept the ‘making automatic enrolment work’ review’s recommendation that we should look to remove the contribution cap in 2017, so it does not send the wrong message about a ceiling for pension saving.
“However, we think it is sensible not to legislate now and to see how the reforms roll out and assess the impact of the contribution limit on Nest and the industry in light of that.”
A Nest spokeswoman says: “We cannot comment on Government policy. The current cap is £4,200, meaning someone on average earnings of around £25,000 could contribute much more than 8 per cent without hitting that limit.”