The Work and Pensions Committee has called for the government to lift restrictions on Nest 'in the next few months', arguing the current cap on contributions and the transfer ban need 'fixing' if plans to reform the small pot pension regime are to take off.
The committee has published a report following a call for evidence into lifting the restrictions on Nest which has backed pensions minister Steve Webb (pictured) to show the European Commission there would be no threat to competition law if the transfer ban and contribution cap were lifted.
Anne Begg, chair of the work and pensions committee, said: ‘The government has already made clear that it will need to “fix” the issue of transfers in and out of Nest if it wishes to implement its “pot follows member” solution to the current problem of small pension pots.
‘As the minister himself recognised, we can’t wait to see if it goes wrong, because by then it will be too late.’
Ros Altmann, independent pensions expert, backed the report: ‘Removing restrictions can be done without primary legislation, so the Department for Work and Pensions needs to approach the EU and clear the way for Nest to compete properly, rather than having its hands tied behind its back.’
‘Without any changes, Nest can't thrive and taxpayers will have to pay nearly £400 million in state aid to Nest, while private providers cherry-pick the best workers.’
The report recommended the restrictions be lifted ‘in the next few months’ to enable smaller businesses to choose Nest prior to their auto-enrolment staging date.
Steve Gay, director of life savings & protection at the association of British insurers (ABI) said was more hesitant about removing the restrictions.
‘Any removal of Nest restrictions should be considered only if there is evidence to show that these are acting as an obstacle to the success of pension reform,’ he said.
‘If no evidence emerges to suggest this, the ABI believes the most appropriate time to remove the restrictions would be following the review in 2017.’