The government is to legislate for the lifting of the cap on contributions into the National Employment Savings Trust, Steve Webb has confirmed.
The pensions minister said that, following a government call for evidence on the restrictions and a lengthy consultation process, it was right to move to raise the maximum contribution levels and remove transfer restrictions in 2017.
Removing the cap on contributions by April 2017 means that the cap will be gone before minimum contributions phase up from their current level.
Following huge industry pressure, the department for work and pensions said in 2012 it would consider a review of the caps.
Helen Dean, managing director of product and operations for Nest, said: “We are pleased the Government has decided that from 2017 members and employers will be able to use Nest as they would any other pension, with no specific restrictions on the amount they can contribute or the ability to transfer in and out.
“We welcome the certainty this announcement brings for employers and members. This means the restrictions will be lifted before minimum contributions rise to 5 per cent in 2017.
“Nest continues to focus on our target market as we always have done. Nest will continue to work constructively to complement other pension providers and will remain available to provide a high quality, low-cost scheme for members in order that all employers can meet their duties under automatic enrolment.”
Some of those who thought the cap should remain in place gave a cautious welcome to the proposals and warned that better communication should be employed.
Steven Cameron, regulatory strategy director for Aegon UK, said: “Now the government has started to take steps to remove the Nest restrictions it’s important that any bias towards Nest is also removed - sooner rather than later.
“The government and the Pensions Regulator should look at how they communicate the scheme to employers and make sure that they don’t overly influence their decision in selecting a scheme. Nest may also need to review its proposition to make sure it’s appropriate for a wider potential customer base.”
He added that the removal of the Nest restrictions highlighted the need for employers to get professional advice.
