Labour is calling for Nest’s restrictions to be removed immediately after the European Commission confirmed lifting the scheme’s contribution cap and transfer ban would not breach state aid rules.
The Government has previously claimed it would “not be lawful” to scrap Nest’s £4,600 annual contribution limit and ban on transfers before a review of the state-backed scheme takes place in 2017. The DWP has also said the restrictions “are part of the definition” of Nest’s public service obligation.
However, an EU Commission document, published by the DWP today alongside confirmation it plans to remove the restrictions in April 2017, says the changes to Nest “do not affect the actual substance of the aid measure”, which comes in the form of a Government loan.
The document says: “The proposed … modifications to Nest… do not affect the aid measure itself but concern only the technical design of Nest, which is necessary to enable Nest to fulfil the obligation [to accept any worker automatically enrolled by their employer]. Therefore, the removal of these two restrictions does not alter the terms and conditions of the aid measure approved in the original decision.”
Labour has been pressing the Government to remove the restrictions ahead of 2017, with shadow pensions minister Gregg McClymont last year accusing the Government of “failing savers and pandering to special interests” for keeping them in place.
McClymont says Labour will now place an amendment to the Pensions Schemes Bill for Nest’s restrictions to be lifted immediately.
He says: “When Labour began campaigning for the Nest restrictions to be lifted, the Government said we were wrong and that EU state aid law made it impossible. So we published detailed legal advice to show that it was entirely possible. I am glad that the government has finally put Labour’s evidence to good use.
“I trust the Government will support the amendment since the only argument against has now fallen.”
Despite pensions minister Steve Webb telling the W&P select committee in 2012 the restrictions were not integral to the state aid arrangement, the committee remained unconvinced and released a report in February 2013 calling on the Government to clarify the issue as quickly as possible.
A DWP spokesman says: ”By April 2017 all employers that existed in 2012 will have to comply with automatic enrolment and minimum contributions will increase from October 2017. This is therefore the appropriate time to lift these constraints. The constraints are working to ensure that NEST focuses on low to moderate earners and smaller employers, and getting these employers and workers into the scheme during the roll out. This will ensure the successful implementation of automatic enrolment and the longer term aims of the reforms.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “If the Government had wanted to introduce Nest without having the controls in place I think they could have found a way.
“The challenge for Steve Webb is he risks finding himself on the wrong side of the conversation because inevitably Labour will say the Government is not acting in the interests of consumers.”