UK – The UK government should "urgently" lift the restrictions placed on the National Employment Savings Trust (NEST), a parliamentary committee has said.
Publishing a brief, standalone report on the auto-enrolment fund as part of its examination of best practice within workplace pensions, the work and pensions select committee once again called on the government to lift a transfer ban and contribution cap imposed on NEST – warning that failure to do so could lead to a less than optimal outcome for auto-enrolled pension savers.
Echoing a previous recommendation to lift the restrictions, made prior to the Department for Work & Pensions consultation on the matter, the report said the restrictions should be lifted "as a matter of urgency".
It added that the contribution cap was introducing additional complexity and that the transfer ban was hindering the consolidation of existing savings into NEST.
"We therefore reiterate our previous recommendation that these two restrictions on NEST be lifted now, rather than waiting for the 2017 review," the report said. "This is necessary to support the continued success of automatic enrolment implementation."
Commenting on the committee's findings, Hymans Robertson partner Lee Hollingworth said removing the restrictions could only be of benefit.
Hollingworth also echoed concerns that the restrictions were hindering the fund's ability to compete for business.
"We have seen firsthand that, in many cases, the current restrictions were the primary reason why NEST failed to be considered," he said.
He added that the removal of restrictions now would increase the likelihood of smaller employers – whose staging dates begin in April 2014 – would consider NEST as one of their options.
The select committee expressed concern about restrictions stopping employers from opting for NEST, as this could aversely impact a member's future outcome.
"If employers decide they cannot opt for NEST because of the restrictions," it said, "there is potential for consumer detriment because employees may not then be offered the best value scheme available."
The committee also noted that, according to evidence from pensions minister Steve Webb, the restrictions could be removed without any new primary legislation – allowing for a relatively swift removal of all barriers.
"While this is reassuring to some extent in terms of the length of time needed to implement the change," it said, "it is important the government publish the response to its consultation and make the decision to remove the constraints on NEST in the next few months, to give employers the certainty they need.
"We recommend the amending legislation then be introduced as a matter of urgency."
The government previously rejected the committee's call to lift restrictions, raising questions over the legality of such a move due to the state aid offered NEST to fund its start-up costs.
While some pension providers have spoken out against the lifting of any restrictions, arguing that they should remain in place until the fund is self-financing and no longer reliant on state funding, union and employer groups, the National Association of Pension Funds and NEST itself have recently all argued in favour of removing any barriers to its competitiveness.