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Thinktank warns small firms could shun Nest

Small firms could shun Nest because of the scheme’s annual cap on contributions, according to influential independent thinktank the Pensions Policy Institute.

The PPI published a briefing note this week detailing how the scheme’s £4,400 annual contribution limit and ban on transfers in and out could affect auto-enrolment.

It says: “Where employers have a workforce that consists of both higher and lower earners, the ability of those employers to use Nest as a sole pension provider is likely to be hindered by the existence of the contribution limit.

“This may be a particular problem for small employers where it may not be viable to run a separate pension scheme for a relatively small number of higher earners.”

The Government has come under increasing pressure to lift the restrictions ahead of a planned review in 2017. MPs, consumer groups, trade unions and Nest itself have all warned of potential consumer detriment if the constraints are not lifted early.

In November, the Government issued a call for evidence seeking views on whether the restrictions are influencing employers’ choice of automatic enrolment scheme in a way that was not intended.

Keyte Ltd director Robin Keyte says: “As an adviser it would make my life easier if Nest had no restrictions but I do not think it is clear they will lead to poor outcomes for low earners.”

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