The work and pensions select committee has urged the Government to make it a “priority” to get certainty on whether Nest restrictions can be removed under EU rules.
In a report on Nest’s restrictions, published this week, the WPSC says the scheme’s £4,400 maximum annual contribution limit and ban on transfers in and out should be lifted immediately. In order to do so, the committee says the Government must ensure EU state aid rules are no longer considered an obstacle.
European Commission rules limit countries from supporting businesses too much if it is seen as a threat to the free trade of the single market.
EC figures predict that Nest will need state loans of up to £379m if membership is low, or £200m if it is high.
Nest’s annual accounts for 2011/12, published in July, revealed the scheme had received £171m in Government loans in total.
The report states: “It is important that the Government now makes it a priority to gain certainty on the state aid issue, to ensure that this is no longer perceived to be an obstacle to removing the restrictions.”
In November, the Government launched a call for evidence on Nest’s restrictions following calls to scrap them ahead of a planned review in 2017. The committee says it agrees with pensions minister Steve Webb, who says the Government should complete its consultation and then make a “strong case” to the European Commission for the removal of the restrictions.
Labour says it has taken legal advice that EU state aid rules will provide no obstacle to lifting Nest restrictions, however Legal & General pensions strategy director Adrian Boulding does not think the EU will agree to remove the restrictions without a fight.
He says: “The legal documents published by the European Commission make it clear that the restrictions were a key mitigating factor in the application to approve these very cheap loans.”