The UK government has confirmed it intends to lift the restrictions on the state-backed pensions provider, the National Employment Savings Trust (NEST), in April 2017, following approval of the plans from the European Commission.
In a written statement to parliament, pensions minister Steve Webb said: “I am pleased to announce the government intends to remove the annual contribution limit and transfer restrictions on NEST.”
He said this would ensure all businesses could be confident that the “low cost and easy to use scheme” was among the options they could choose to enrol their workforce.
The current cap on annual contributions and limits on bulk transfers are to be scrapped on 1 April 2017, and the government is also keeping the option of removing restrictions on individual transfer restrictions from 1 October 2015.
This latter option would be taken if the government adopted the pot-follows-member approach currently under discussion, whereby an individual’s pension savings would be automatically accumulated in one pension plan despite job changes.
The Department for Work & Pensions (DWP) said a year ago it would lift the restrictions, but as NEST receives a loan from government to fund its running costs until it becomes self-sufficient, it required approval for the plan from the European Commission.
The commission concluded earlier this year that the aid was still compatible with the internal market, in spite of the changed conditions.
Webb said there would now be a short technical consultation on draft legislation this autumn to remove the annual contribution limit and the bulk transfer restrictions.
Consultancy Barnett Waddingham reacted to the announcement, saying NEST should show it could pay back its debt to the government before the restrictions were lifted.
“Before the removal of these restrictions we should remember that NEST is essentially an artificial provider created by government loans that we as taxpayers fund to the tune of £239 million plus,” said Damian Stancombe, head of workplace health and wealth at the firm,
NEST had been allowed to exist as a non-competitive entity because it would otherwise distort the provider market, he said.
“The removal of the contribution limit and transfer restrictions is a step towards making NEST more competitive and should therefore only be allowed if the repayment of NEST’s debt to the government is properly clarified,” Stancombe said.
Meanwhile, Roger Urwin has joined the 300 Club, the 15th member of the group consisting of leading global investment professionals.
Urwin is the global head of investment content at Towers Watson, where he has worked since 1989. He currently is a board member of the CFA Institute’s board of governors and an advisory director at MSCI.
He said the 300 Club was committed to an “agenda for change” that he wholeheartedly supported.
“I think ahead to an investment industry that can realize its full potential as one of society’s most-prized contributors for good.
“It can do so by overcoming some material weaknesses, which I see as excessive costs; inconsistent governance; unpreparedness to take a long view; and control over the negative impacts it can inflict on the wider economy and society,” he added.
The group’s chairman, Lars Dijkstra, CIO at Kempen Capital Management, added that he welcomed Urwin and looked forward to challenging “conventional investment thinking” with him.
In other news, the Society of Pension Consultants (SPC) has announced it is changing its name to the Society of Pension Professionals (SPP) immediately, to reflect its broad membership base.
It is launching a new website as part of the new branding exercise.
The SPP said its members now included not only consultants and actuaries but also accounting firms, solicitors, insurance companies as well as investment houses, independent trustees and others.
These members also work with most of the 500 largest pension funds in the UK, it added.
Duncan Buchanan, SPP president, said the new brand better reflected the “broad church of our membership which is drawn from across the whole pension landscape.”
In its first year, the newly-renamed society’s main priorities would be to work with government, regulators and other industry bodies developing and introducing the tax changes to defined contribution plans and the guidance guarantee announced in the last budget, he said.