They spoke out after pensions minister Steve Webb said maximum contribution levels would be raised and transfer restrictions removed by 2017 after auto-enrolment has been rolled out.
The proposed changes will allow Nest to raise the maximum contribition level above the current limit of £4500 a year. Minimum contributions will rise to 5 per cent by October 2017 and 8 per cent by October 2018, compared to the current 2 per cent cap.
Mr Nolan said: “We would have preferred this to be sooner than the expected date of 2017. Our recent poll of large employers found that 75 per cent wanted these restrictions removed and it is easy to see why.”
Mr Cameron said: “It’s important that any bias towards Nest is removed, sooner rather than later.
“The government and The Pensions Regulator should look at how they communicate the scheme to employers and ensure they don’t overly influence their decision in selecting a scheme. Nest may also need to review its proposition to ensure it is appropriate for a wider potential customer base.”
The calls for early implementation were backed by Tom McPhail, head of pensions research for Bristol-based Hargreaves Lansdown. He said: “It would have been better if the restrictions could be lifted even sooner but the government is making this happen as soon as it realistically can.”
Helen Dean, managing director of product and operations for Nest, said the move would ensure that employers see Nest in the same light as any other pension, but that it remained committed to “provide a high-quality, low-cost scheme for members”.
Frances O’Grady, general secretary of the Trade Union Congress, supported the move and said the restrictions had placed “heavy burdens” on employers. Neil Carberry, director for employment and skills of the Confederation of British Industry said the decision was “sensible”.
Mr Webb issued his statement on Tuesday after a lengthy consultation process that started on 6 November last year when the department for work and pensions set out a call for evidence.
The consultation, supporting auto-enrolment: a call for evidence on the impact of the annual contribution limit and the restrictions on transfers on the National Employment Savings Trust’ finished in January 2013 and responses were published earlier this year.
Mr Webb said: “This will give employers the certainty they need that Nest will continue to be an appropriate scheme for them and their workers when minimum contributions rise, or should they choose to contribute more.”
Removing the cap on contributions by April 2017 means that the cap will be abolished before minimum contributions are increased from their current level.
PENSIONS BILL
Meanwhile, the government’s work and pensions committee has been exploring the details of the Pensions Bill, which is passing through the final stages before being enacted.
Speaking at a committee meeting this week, Steve Webb referred to a 64-page explanatory document on the deferral of the state pension, published by the department for work and pensions, as a “real rip-snorter”.
Mr Webb said the issue of allowing individuals to defer their state pension to later on in their retirement, the manner in which it is calculated according to bank base rates, and the different tax treatment of it when taken as a lump sum or as regular income, was incredibly complicated and needed to be simplified.
He said: “I shall spare the committee from hearing the full version of the process in respect of the tax treatment of the lump sum but I shall give a flavour of its complexity.
“We have an odd situation. We recognise that people might not want to take their state pension on time, but that what to do is a difficult decision to make and that, sometimes, according to what the Bank of England base rate happens to be, they should make a different decision.”
Promoting clauses in the bill to help streamline the pension and give people who defer the option to invest it themselves in an Isa or similar account, would be “cleaner, easier and cheaper to administer and simpler for citizens”, he said.
| Adviser reactions |
| Philip Pearson, partner of Hampshire-based P&P Invest, said: “This creates a level playing field and will enable people to put a reasonable amount into their pensions, but it still won’t be the ideal solution for most. The level of contributions is still far less than is required to have a prosperous retirement, so lifting the cap will ultimately be insufficient.” Carl Lamb, managing director of Norfolk-based Almary Green, called for the government to stop “changing the goal posts” on pensions. He said: “Who knows what lies ahead? Pensions are now at the mercy of politicians and yet another pawn in their political games.” |
