Labour says the Government has “failed savers and pandered to special interests” in deciding not to remove Nest’s restrictions until 2017.
Ealier this week, pensions minister Steve Webb published a written ministerial statement confirming the Government’s intention to remove Nest’s £4,500 annual contribution cap and ban on transfers in and out in four years time.
Webb said the contribution cap and the ban on bulk transfers will be lifted in April 2017, while the ban on individual transfers will be removed when the Government introduces its proposed “pot follows member” automatic transfer system.
However, it is not yet clear when pot follows member will be introduced.
Labour shadow pensions minister Gregg McClymont says: “Last year, the Government blamed Brussels for not being able to lift the restrictions on Nest.
“We published legal advice to say this was not true. This year, they say that they can lift the restrictions after all but not until 2017 and after the majority of people have already been auto-enrolled.
“The Government has failed savers and pandered to special interests instead.
“We need urgent action now to create private pensions people can trust.”
In May, Money Marketing revealed at least one insurer was planning to launch a legal challenge if the Government decided to remove Nest’s restriction before a planned review of the scheme in 2017.
Legal & General pensions strategy director Adrian Boulding, who was part of the Making Automatic Enrolment Work review team, says: “It is very sensible that the Government has gone with the recommendation we made in 2010.
“This means the £600m which taxpayers have spent on Nest will remain closely focused on its crucially important target market.
“Beyond that it is open season and there is no need to retain protections for the private sector. This announcement provides clarity for the market about Nest’s future, which is hugely important.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “The artificial restrictions on Nest have been an unwelcome complication for businesses and their employees.
“From the outside it never made much sense to have a set of rules which were peculiar to one particular pension scheme and it has only been the vested interests of some within the pensions industry which have argued for their retention.
“There is still a significant risk of a pensions capacity crunch over the next few years, a restricted Nest would only exacerbate this problem. It would have been better if the restrictions could be lifted even sooner but the Government is making this happen as soon as it realistically can.”