UK – The "burden" of the National Employment Savings Trust's (NEST) public service obligation outweighs any competitive advantage it could enjoy through lifting government-imposed restrictions, the UK's union umbrella group has told pensions minister Steve Webb.

The joint letter – signed by the TUC's general secretary Frances O'Grady, the British Chambers of Commerce and the Federation of Small Businesses, as well as pensioner and consumer advocate groups – said the restrictions had served their purpose.

Currently, pension pots cannot be transferred into NEST, which caps the level of contribution at £4,400 (€5,150) per employee, meaning that contributions above the cap would need to be made into a second scheme.

The letter said: "Lifting the restrictions now will not undermine this. On the contrary, it will improve the prospects of NEST's objective being met."

The letter also pointed out that the fund's obligation to welcome employers that private sector providers might consider commercially unviable added to its administrative costs.

"These burdens ensure that NEST has not been given any special competitive advantage by the limited public support given through its 'soft' loan agreement," Webb was further told.

"The additional restrictions in place further erode its ability to compete with other providers in the open marketplace, which is in contrast to the role NEST sees for itself."

The TUC's letter further argued that NEST's inability to be the sole pension fund for some employers added to the administrative burden of auto-enrolment.

"We would stress," it said, "that lifting the restrictions in 2018 is not a compromise position and will be too late for many employers, a large number of which have a staging date in 2014."

Concerns over the complexity facing employers was shared by Capita Employee Benefits head of marketing Robin Hames, who said the transfer "shackles" had become counter-productive.

He added that restrictions should be lifted "sooner rather than later" and that there were matters of pot consolidation to consider.

"NEST should be part of any small pot transfer solution to ensure members have as much flexibility as their counterparts in other schemes," he said.

The Department for Work & Pensions launched its consultation on the restrictions in late November after it had previously told the work and pensions select committee its proposal to remove the restrictions "would not be lawful".

Proponents of the restrictions placed on NEST have argued that they should remain in place until the fund is self-financing and that the transfer restrictions should be relaxed so that the DWP's automated 'pot follows member' approach can be implemented.