Insurers are concerned that scrapping Nest’s annual contribution cap will lead to “mission creep”, with the scheme potentially targeting higher-income employees in an effort to repay the Treasury’s estimated £904m loan.
Last week, Money Marketing revealed that officials at the Department for Work and Pensions are under pressure to reconsider the £4,200 annual limit as the scheme prepares to accept contributions from a small voluntary group of employers this summer.
A leaked ABI email to its members said: “As a result of recent press coverage, the DWP now feels under pressure to look again at the Nest contribution limit.
“The annual limit is designed to focus Nest on its target market of individuals who the existing industry finds it difficult to serve, therefore complementing rather than replacing existing provision.
“The DWP is concerned that the limit will not be as effective as it could be in achieving the policy intention and would like feedback.”
Standard Life head of pensions policy John Lawson says some insurers are uneasy about how scrapping the limit could affect business volumes.
He says: “There are still worries about mission creep if the contribution cap goes. There are also a few people who are concerned that Nest is quite aggressive and acquisitive.
“Nest is under pressure financially, so there is a danger that if the Government lifts the contribution limit, it will go after bigger schemes, bigger employers and wealthy employees.”
Hargreaves Lansdown pensions analyst Laith Khalaf says: “The cap is a concession to the pensions industry but the contributions that are going to be made to Nest are unlikely to go near the cap anyway.
“Whether you have it there or not, I doubt it will significantly impact on the amount of money going into Nest.”
In an interview with Money Marketing last month, Nest chief executive Tim Jones insisted that the Government had “no ambition to go further than is necessary” with Nest.