NEST says 'detrimental' restrictions placed on fund should end
UK – Restrictions placed on the National Employment Savings Trust (NEST) are detrimental to its members and should be removed by next spring at the latest, the auto-enrolment fund has said.
Arguing that the UK pensions landscape had changed since the restrictions were legislated for in 2006, NEST for the first time argued that they should be lifted, publishing its response to a recently concluded consultation on the matter.
Currently, the fund cannot accept individual contributions above £4,400 (€5.150) or allow pension pots to be transferred into the fund or shifted to another provider.
Chief executive Tim Jones said that lifting the restrictions was needed to ensure the success of auto-enrolment.
"NEST's restrictions complicate the decision-making process of medium-sized employers, many of which will experience a private pensions sector already busy supporting other clients and will therefore look to NEST as a potential provider.
"Removing the restrictions will help us help those employers to get the job done."
Jones made a similar point earlier this week when speaking at an event hosted by NEST, at the time questioning if the private industry would have the capacity to cope with the number of small companies needing pension provision come late 2014.
Explaining its wish to see the legislative changes passed by spring 2014, the fund's response said this would clarify the situation before the auto-enrolment dates for medium and smaller companies occurred.
The response said: "Removing the restrictions at the earliest opportunity would allow NEST to fulfil the role that was originally envisaged – for it to be a high-quality, low-charge scheme that any employer can choose to use to fulfil their duties and through which low to moderate earners can save with confidence for their retirement."
The response also cited evidence that the restrictions were of "direct detriment" to members.
"The data suggests there are already some members who are being frustrated in their ability to make the level of provision for their retirement that they would wish to because of the artificial limiting effect of the contribution limit," it said.
"There is also evidence of a clear risk of a growing burden to business as staging evolves, counter to the need for complying with the duties to be as simple as possible for the growing number being called to duty each month.
"Providers will be able to differentiate their offering to employers where they wish to do so to win that business."
However, it also highlighted the positive impact of NEST's lower charges on the market.
"We have seen other providers alter their price and proposition to win business over NEST, and none of these things changes as a result of lifting the cap on contributions or the restrictions on transfers," it said.
The work and pensions select committee first called for NEST's restrictions to be lifted in March last year, but saw the government reject the suggestion, questioning its legality.
However, November saw the Department for Work & Pensions launch a consultation on the matter, which has seen both the National Association of Pension Funds and a group consisting unions, employer lobby groups and consumer advocates calling for the restrictions to be lifted.