Govt urged to reconsider NEST restrictions

The restrictions on the National Employment Savings Trust (NEST) may no longer be appropriate, two of its chief officers have said.

NEST has an annual contributions limit of £4,200 in 2011/12 per person, and a ban on transfers in and out of the vehicle.

Last week, MPs asked how NEST could compete with other private sector providers given the disadvantage these restrictions presented.

Today Tim Jones, chief executive of NEST Corp, and Lawrence Churchill, chairman of NEST, suggested it may be time for the government to reconsider NEST's limitations or risk private sector providers undercutting the government vehicle.

Giving evidence to the Work and Pensions Committee today, Churchill said: "A lot has changed since the restrictions were put in place in 2007. Who would have thought then that we would be partnering with pension providers?"

The restrictions are due to be reviewed in 2017, but because the government has given small businesses an extra year to prepare for auto-enrolment, some industry voices are calling for the review to be pushed back to 2019.

Others have said the restrictions should be removed now because private sector providers such as NOW: Pensions have entered the market.

Churchill added: "It is difficult to see how the restrictions are in members' interests. Everyone has agreed the restrictions should go, but it is a question of timing."

Jones said the restrictions helped NEST to create a product designed for its target market, which was primarily people working for small employers who had no pension provision.

However, he added the ban on transfers into NEST makes the vehicle unattractive to large employers with low-paid workers looking to consolidate their pension provision, which was counterproductive.

"It may be appropriate to look again at the restrictions," Jones said.