The National Employment Savings Trust has revealed it will not apply its 1.8 per cent contribution charge on transfers into the master trust, after the government confirmed it was lifting a four-year ban on transfers in.
That will mean funds transferred into the scheme will only be subject to Nest's 0.3 per cent annual management charge.
The government-back auto-enrolment provider also revealed members would be free to transfer out, and would pay no exit fees.
Until now, Nest members have not been permitted to consolidate other pension pots into their Nest pot.
However, the Department for Work and Pensions confirmed today (2 March) that this restriction would be lifted from 1 April this year.
Only existing Nest members will be allowed to transfer funds into their Nest account.
Nest chair Otto Thoresen welcomed the lifting of the transfer restriction, which he said was unpopular with the small employers Nest was designed to service.
"It’s vital that small employers are able to choose Nest for auto-enrolment without barriers," he said.
"Employers told us that Nest's contribution cap and restrictions on transfers would have made this difficult because they do not have the resources to run multiple schemes, so the removal of these constraints is welcome."
However, he said he expected the number and value of transfers to be small, because the majority of Nest members had only recently begun saving for a workplace pension.
"Our priority is to enable members with modest retirement savings to consolidate them in one place and to get good value for money. Members who want to transfer their pots out of NEST won’t be charged to do so," he said.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said the move would be "hugely beneficial" for pension savers, saying consolidation of pension pots was "vital to ensuring people get to retirement with enough income".
However, he added: "The reduction in charge and increased market competition points uneasily towards the £500m loan which remains the elephant in the room.
"A formal repayment structure would go a long way to allaying fears that the government will never recoup the money they have spent."
Nigel Sycamore, a business adviser and director of auto-enrolment specialist Clear Workplace, confirmed that the ban on transfers into Nest deterred him from advising employers to sign up to the master trust.
He told FTAdviser he only used Nest as "a scheme of last resort" for this reason.