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Govt rejects calls to scrap Nest restrictions

The Government has rejected calls from the work and pensions select committee to scrap the restrictions on Nest ahead of the 2017 review.

In March, MPs published a report calling for Nest’s contribution cap and the ban on transfers in and out of the Government backed scheme to be removed “as a matter of urgency” so it can compete more widely.

Under current plans, annual contributions into Nest will be capped at £4,200 and transfers in and out of the vehicle will be banned.

In its response to the committee’s report, the Government says: “Nest is an impressive product and it is important that employers consider fully whether it is an appropriate scheme for their workers.

“If there are barriers, or perceived barriers, to employers choosing Nest, where it is appropriate for them to do so, the Government needs to consider carefully what can be done to remove them.

“However, the evidence that the Nest restrictions are acting as a barrier is not unequivocal and the Government is conscious that the restrictions were designed to ensure that Nest’s focus remained on its target market.

“In particular, the committee is right to raise the issue of state aid. It would not be lawful for the Government to remove the restrictions simply to increase take up of Nest – there would need to be evidence that such action is required to address market failure.”

Aegon regulatory strategy manager Kate Smith says: “We think this is the right decision by the Government. There is no evidence that Nest’s barriers need to be removed at the moment and much of the market has already joined up with Nest.

“So from an employer and customer perspective there is no problem.”

Labour Shadow pensions secretary Gregg McClymont says: “I am disappointed at how long the government is taking to review the issue. My view is that an objective review will find that there is scope to lift the restrictions.”

A DWP spokewoman says the Government is still considering the report’s recommendations.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Adrian Boulding 25th May 2012 at 11:52 am

    The NEST restrictions are there to comply with EU State Aid rules, which prevent national Governments from subsidising State owned businesses that compete against the private sector. They protect the shareholders of private sector enterprises against unfair competition. Those shareholders are in reality ordinary working men and women up and down the country who have saved for their future through pensions and ISAs. The NEST restrictions are protecting ordinary savers in any stockmarket linked fund investing in businesses involved in the pensions industry, which includes many FTSE 100 companies.

  2. some sense at last….now all we need is to get the salary entry level increased to 10k

  3. Dennis Burling ACII APFS, Chartered Financial Plan 25th May 2012 at 12:44 pm

    What a joke…

    The Government is supposedly trying to make people save from their income but they are restricting options if they do – do the or do they not want to encourage more pension contribution ??

    In the present climate no-one with any sense is paying into a pension unless thay are getting higher rate tax relief so all this will do is add to the numbers of opt outs that are already likely to be very high.

    What a huge waste of everyone’s time & money !!!

  4. NEST will prove to be yet another government white elephant as it scratches its head on how best to MAKE people save for retirement. !

  5. What a muddle! This is what happens when it’s all about politics.

    NEST was set up because the government had too little faith in markets and too much faith in its own ability to control things. All political colours are guilty of this.

    Talking of guilty, guilty feelings about setting up a “national champion” and political “thinking” led to the partial hobbling of it! That hobbling was done on the basis of transfers and contribution levels even though the purpose of NEST was to serve *small employers*.

    Muddled thinking, muddled response. Now, shall we talk about MAS?

  6. Youth unemplyment is growing steadily yet employer NEST contributions will bring the “employer surcharge” on employment to 15%

    11% NI + 3% NEST

    Assuming it is going to cost small employers say 2% of their wages bill to run NEST the employer surcharge on employing 1 more person could be as high as 17 to 18% !

    Not exactly an incentive for small employers to take on unemployed youngsters is it.

  7. If the Government wants to make people save for retirement its simple – National Insurance contributions.

    Lets stop messing around creating White Elephant after White Elephant.

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