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MPs want Nest restrictions lifted ‘urgently’

MPs have called for Nest’s contribution cap and the ban on transfers in and out of the Government backed scheme to be removed “as a matter of urgency” so it can compete more widely.

Under current plans, when the National Employment Savings Trust begins operating in October, annual contributions will be capped at £4,200 and transfers in and out of the vehicle will be banned.

A new report from the work and pensions select committee 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, which it says is the “obvious” vehicle for aggregating small pots.

The restrictions are due to be reviewed in 2017, but the report says if rules governing the Government loan used to set Nest up allow, the restrictions should be removed as “a matter of urgency”.

Committee chair Anne Begg says: “These restrictions make it impossible for Nest to meet the needs of all the employers and employees who might want to use it. By lifting these two key restrictions placed on Nest, the Government would remove barriers that might currently prevent employers from choosing it as their pension scheme as well as making it easier for employees to bring together their small pots.”

Nest chief executive Tim Jones says: “There is some evidence to suggest the restrictions are having detrimental effects and unintended consequences by restricting employer choice, preventing members in our target market having access to Nest and increasing the complexity of how the product works and so increasing costs to our members.”

Speaking to Money Marketing, committee member and Conservative MP Brandon Lewis says the Government should review the restrictions in 2013, when the scheme has been operational for a year. He says Nest and the market would benefit from having the restrictions removed but that it is important Nest does not dominate the market.

He says: “By 2013, quite a few of the big firms will have been enrolled, and we will be able to see if Nest is getting too big for its boots and if it is not then we can look at removing the restrictions.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. not a surprise on two fronts. Firstly that some people think it is perfectly ok for a government subsidised entity should compete with private enterprise and secondly that they all want to continue meddling rather than wait to see how NEST fares. Shows again the misplaced self-importance.

    i for one would like the puiblic to be able to vote every 5 years to strip politicians of their titles…might make them consider a bit more

  2. It’s amazing how often MPs want to get aboard the latest band wagon. Its not often that that they clamber on board before it even reaches town.
    NEST is the default pension facility. It is therefore unlikely to be used at anything above peasant level. It is unlikely to be used much by larger companies. It is unlikely to be much in vogue for a year or two at least. So why the current band wagon rush.
    One gets the impression that the current thinking is to use it as a Small Pots dumping ground. That is an idea with merit, but is not the original intention. Consequently, taking a little time to think things through may result in a workable result, rather than the mishmash of inappropriate rules we normally have to endure.
    I have some sympathy for jp’s 5 year thought, but it is likely to encourage more band-wagon jumping and ill thought out reactions just to have the appearance of “doing something”. It’s about time pension provisions had a breathing space to see if there is anything worthwhile to be rescued from the present shambles.

  3. We have spoken to many employers about NEST in recent months. In every case, employers have expressed a desire, with varying degrees of vigor, to avoid having anything to do with a scheme set up by the Govt. It does therefore seem somewhat irrelevant as to what is changed and what is not. Here comes stakeholder 2 with a much larger bill.

  4. As usual, the architects of NEST ignored all advice and then seek to make changes later to overcome the deficiencies that were pointed out to them at the time. those who proposed to run NEST were perfectly happy with the conditions at the time. What material changes has there been that would require changes now? None. It’s just the usual sleight of hand to get your budget and then change your remit. Echo’s of Sir Humphrey’s approach?

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