Pensions minister Steve Webb has warned lifting Nest’s restrictions before 2017 could see the Government locked in an expensive and lengthy legal battle with insurers.
The Department for Work and Pensions came under fire from Labour earlier today after Webb announced Nest’s £4,600 contribution cap would not be scrapped until April 2017. The Government says it will also consider lifting the ban on transfers in and out of the scheme from 1 October next year.
Labour shadow pensions minister Gregg McClymont says the party will propose an amendment to the Pensions Schemes Bill that would see Nest’s restrictions lifted immediately.
Speaking to Money Marketing, Webb says if the Government had tried to remove the restrictions earlier than it has proposed, private sector pension providers could have launched a judicial review.
“If you crash in with these things you leave yourself open to a judicial review,” he says.
“Can you imagine if we had been cavalier about this and ended up in the courts? It would have been an absolute shambles.
“If Labour win the election and stand up in spring next year and say ‘we will remove Nest’s restrictions tomorrow’, there is a risk the whole thing will unravel…for the sake of political posturing. It is nonsense.”
Webb insists the Government is not being “blackmailed” by the vested interests of the pensions industry and says the decision was reached after “detailed negotiations with the European Commission”.
He also confirms proposals to introduce automatic transfers for small pension pots will not be implemented until after the general election.
He adds: “I don’t think anyone would thank us if we rushed to introduce pot follows member in spring 2015 given the amount of change the pensions industry is already having to deal with.”