Response to consultation on the annual contribution limit and transfer restrictions on the National Employment Savings Trust.
The Department for Work and Pensions sought views and evidence on whether the annual contribution limit and transfer restrictions on the National Employment Savings Trust (NEST) were having unintended consequences. Today (9 July 2013), the government published its response – Supporting automatic enrolment.
The government found a perception that the constraints were stopping NEST serving its target market. However, the contribution level remains at 2 per cent, only the very top earners in the country could possibly be excluded from using NEST.
Ministers have decided to legislate now to lift the constraints from 2017. Employers will, therefore be certain that NEST will remain a suitable pension scheme for their workers when minimum contributions rise to 8 per cent.
Steve Webb Minister for Pensions said:
"With over 250,000 members already, it is clear that NEST is a success. Targeting low to moderate earners that the market has traditionally forgotten, NEST has innovated with its use of language and investment strategy and has ensured that everyone has access to quality pension provision. That is why I am not making any changes until 2017, when automatic enrolment is fully rolled-out. At this point I will lift the contribution limit so that NEST remains a force for good in the marketplace, driving up standards and best practice.
The position on bulk transfers is much the same. As huge numbers of employers gear-up to start to enrol their workers, we need NEST to focus on getting these people in to pension saving. Once this is achieved and the market is established, the restrictions on bulk transfers will be lifted.
The government is currently legislating to introduce a system of automatic transfers, and will enable NEST to make individual transfers when the ‘pot-follows-member’ arrangements are introduced."
Joanne Segars, Chief Executive, NAPF, said:
“NEST has an important role to play in making auto-enrolment a success, and it should not be held back from doing so.
“There might have been a case for lifting these barriers earlier, but doing so from 2017 provides the clarity and certainty that employers, savers and the pensions market all need.
“The changes to transfer rules and contributions are sensible. Employers will be able to treat NEST like any other pension on the market, and savers will be able to pool their small pension pots into a simpler and bigger fund.”
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