Government removes NEST restrictions – Payroll World News – Pensions

– Payroll World reports

Restriction on annual contributions into NEST will be lifted from 1 April 2017, pensions Minister Steve Webb has announced. The cap currently limits the maximum annual contribution into NEST to £4,600 and the transfers of funds – such as from a person’s previous pension – are forbidden. The Department for Work & Pensions (DWP) says it has also retained the option to lift the restriction on individual transfers in and out of NEST from 1 October 2015.

Steve Webb MP said: “I am pleased to announce the government intends to remove the annual contribution limit and transfer restrictions on NEST, to ensure all businesses can be confident that this low cost and easy to use scheme is among the options they can choose to enrol their workforce. “This is a common sense decision. By convincing Europe to support us, we’ve achieved a victory for consumers.” Tim Jones, chief executive at NEST, said: “This is a welcome and timely confirmation that the restrictions on contributions and transfers will be removed by 2017, particularly with automatic enrolment now starting to affect medium and smaller employers. “That not only simplifies things for employers, but also helps NEST members in building up their pots in the longer term.” The restrictions on the amount British workers can save towards their workplace pension and the ban on transferring old company pensions into the scheme – or taking it with them if they moved jobs – were imposed by the European Commission (EC). EC rules restrict state funding for companies that operate in the private sector because of fears that a state-funded pension scheme could distort or threaten competition from private pension firms. After assurances from the UK government, the EC has considered and approved the modifications to the case for state aid for Nest. Small pots Relaxing the rules means workers could avoid the situation of having lots of small pensions scattered around in the schemes of former employers, which risked people losing track of their savings. Removing the cap on contributions by April 2017 means the cap will be gone before minimum contributions increase from their current level of 2% to 5%. Tom McPhail, pensions research manager at the UK’s largest IFA Hargreaves Lansdown, said: “Auto-enrolment is working better than expected. The argument in favour of artificially restricting NEST’s ability to compete directly with its pensions industry peers is no longer relevant. “[Also] Steve Webb is in a tearing hurry to get his ‘Pot Follows Member’ [officially known as Automatic Transfers] project bedded in before the election. In this context, the NEST restrictions on transfers are an inconvenient complication. National Employment Savings Trust (NEST), which was established by government as part of auto-enrolment reforms, is a national defined contribution workplace pension scheme available to all employers to use to meet their new duties. NEST currently has over 1.5m scheme members and works with over 8,900 employers.