The Government will face a challenge from at least one major UK insurer if it attempts to lift Nest’s restrictions before 2017, Money Marketing understands.
Nest is currently subject to a £4,400 annual cap on contributions and a ban on transfers in or out. The restrictions are due to be reviewed in 2017.
The Department for Work and Pensions has held talks with representatives from across the insurance industry in recent weeks as part of its call for evidence on lifting Nest’s restrictions early.
Two senior figures at major UK providers who have met with DWP officials in the last two weeks say they expect the Government will propose removing Nest’s contribution cap before the 2017 review.
One of the sources says: “We are expecting the contribution cap to be lifted at the very least.
“The DWP’s concern is that employers already find auto-enrolment very complicated and the Nest restrictions are an extra complication they could do without.”
The second source says: “The very strong sense I got from the meeting was the DWP is angling to lift the restrictions early.”
However, Money Marketing has spoken to a senior figure at a third major provider who says it will contest any decision to remove Nest’s restrictions early.
The source says: “The DWP knows if it wants to lift the restrictions it will have to go back to Brussels because they are such a clear feature of the state aid agreement.
“We will absolutely challenge any decision to lift the restrictions early. Nest is a state provider enjoying a very large state subsidy. If you allow it to compete unfettered with the rest of the market then it distorts competition, and that is against EU law.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “Steve Webb should try to lift the restrictions early and the industry needs to focus on the longer term goal of rebuilding consumer trust in the retirement savings industry.”
A DWP spokeswoman says: “We are carefully considering the evidence provided and having further discussions with stakeholders. We will publish a response in due course.”