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Government to consult on NEST pension restrictions

 

The Government is to consult on plans to lift some of the restrictions governing the new National Employment Savings Trust, also known as NEST.

 

The Department for Work and Pensions (DWP) is seeking views and evidence on whether the annual contribution limit and transfer restrictions on NEST are influencing employers’ choice of automatic enrolment scheme ‘in a way that was not intended’.

 

Run by a not-for-profit trustee corporation, NEST has a legal obligation to accept all employers who wish to use it to fulfil their automatic enrolment obligation.

 

The independent defined contribution pension scheme has been designed to serve low to moderate earners and smaller employers.

 

However, contributions into NEST are currently limited to £4,400 a year in 2012/13 terms, while transfers into the scheme are also restricted.

 

The Government now fears these limitations may be hindering employee retirement saving.

 

The pensions minister, Steve Webb, said: ‘We are already seeing the positive effect that Nest is having on the world of pensions. Workers are being signed up for workplace pension schemes at much lower charges than in the past and firms have much more choice of provider than in the past.

 

‘But we need to make sure that this continues, as automatic enrolment moves on to smaller firms and that the constraints on NEST are not a barrier to good consumer outcomes.’

 

The consultation has been welcomed by some experts, including the National Association of Pension Funds, Age UK, Saga and the TUC.

 

‘We've long argued that lifting restrictions on NEST would help more people build up one lump sum for retirement that can be converted into an annuity in later years,’ commented Michelle Mitchell, director of Age UK.

 

‘Without these changes, people who switch jobs frequently will find themselves with lots of little pension pots which are difficult to convert’.