Shadow pensions minister Gregg McClymont says the restrictions placed on Nest have achieved their aim of delivering a low cost scheme for lower earners and that the Government should now remove them.
Nest was set up with a loan from Government and will begin operating in October with an annual cap on contributions and a ban on transfers in and out of the vehicle. The restrictions are currently due to be reviewed in 2017.
A new report from the work and pensions select committee says if rules governing the Government loan used to set Nest up allow, the restrictions should be removed as “a matter of urgency”. Pensions minister Steve Webb told the committee in January the restrictions were “not integral” to the European state aid rule governing the loan.
McClymont (pictured) says: ““The restrictions have played their role in ensuring that Nest developed well-designed and low charge pension products focused on lower earners. The committee makes a compelling case that lifting the restrictions on NEST would now be to the benefit of consumers and employers. The Government needs to move from consideration to action.”
The committee’s report says the contribution cap will mean high earners cannot use the scheme so firms would have to run two pension schemes increasing complexity and costs. It also says the ban on transfers in will stop savers consolidating small pots in Nest, the “obvious choice” for the role.
The Association of British Insurers has called for Nest’s restrictions to be left in place to ensure the scheme remains focused on low earners.