The UK’s pensions industry is debating proposals to remove restrictions on a scheme that will support auto-enrolment of millions in workplace pensions.
The National Employment Savings Trust (Nest) is a low-cost pensions vehicle that is expected to absorb many of the scheme members created when auto-enrolment begins for large firms in October. As it stands, employees will not be able to transfer their existing pension pots into Nest and there will be a cap on the annual contributions employees can make.
The report by the Work and Pensions Committee, which endorsed the auto-enrolment scheme, recommended removing these restrictions. The ban on transfers would be “disruptive” to employees who wanted to consolidate their pension pots and for employers who wanted to operate a single scheme, it said. It added that the cap on contributions could prevent high earners from joining Nest.
Lee Hollingworth, head of defined contribution at consultancy Hymans Robertson, called the proposals “entirely sensible”.
“There has never been a strong rationale for having the current restrictions and many employers we have been working with have discounted Nest as an option due to these limitations.”
But other industry figures said it was too late to make changes to Nest’s structure and that the government should wait until Nest is reviewed in 2017.
“With the introduction of auto-enrolment just a few months away, we would caution against making further changes to what is a carefully balanced regulatory framework,” said Neil Carberry, director for employment policy at the Confederation of British Industry.
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