The government’s decision to scrap the contributions cap previously limiting how much people could pay into the National Employment Savings Trust has been broadly welcomed by industry commentators, despite some saying its slow implementation date could put savers at a disadvantage.
Earlier this year (1 February) Nest responded to the government consultation by saying there was a “strong case” for removing the restrictions by 2014. This morning (9 July), the government announced it would repeal the Nest contributions cap and remove transfer restrictions from 2017.
Frances O’Grady, general secretary of the Trades Union Congress, said: “The restrictions on Nest are bad for savers and put unnecessary burdens on employers.
“Nest has already shown that it is ideal for the modest earners and smaller employers that traditional pension providers failed to reach. We therefore warmly welcome Steve Webb’s announcement that the restrictions will go, even if we would have wanted them scrapped more quickly.
“But we are disappointed that the ban on pot transfers is not happening more quickly. We would have preferred an early date to help those who move jobs, as well as Nest members with pots from earlier savings in poor legacy schemes.”
Shadow pensions minister Gregg McClymont also said that waiting until 2017 could put savers at a disadvantage.
He said: “Last year, the government blamed Brussels for not being able to lift the restrictions on Nest. We published legal advice to say this was not true. This year, they say that they can lift the restrictions after all. But not until 2017 and after the majority of people have already been auto-enrolled. The government has failed savers and pandered to special interests instead.”
Although not going so far as to say the government has “failed savers”, Joanne Segars, chief executive of the National Association of Pension Funds, said: “There might have been a case for lifting these barriers earlier, but doing so from 2017 provides the clarity and certainty that employers, savers and the pensions market all need.
“The changes to transfer rules and contributions are sensible. Employers will be able to treat Nest like any other pension on the market, and savers will be able to pool their small pension pots into a simpler and bigger fund.”
In contrast, one commentator said the government will avoid distorting the market by removing the restrictions according to its original timetable.
Neil Carberry, director for employment and skills at the Confederation of British Industry, said: “By sticking to the original timeline the government will ensure that Nest will be able to deliver its public duty effectively without distorting the market.
“This means Nest won’t stand in the way of innovation and a competitive auto-enrolment market, and businesses, providers and pension savers will have certainty about what will happen when.”
