Relax pension scheme rules - MPs
Published 11/02/2013 | 00:06
Workers are in danger of being shut out of the best value pensions unless the Government lifts restrictions around a scheme which is key to its landmark retirement reforms, a committee of MPs have warned.
The Work and Pensions Committee said that caps on annual contributions into Nest and a ban on transfers in and out of the scheme must be scrapped "as a matter of urgency".
It warned that the current rules will force employers to plump for alternatives to Nest which are more flexible but do not have the same obligations placed on them to keep costs low.
Nest (National Employment Savings Trust) was set up as a not-for-profit option to fill gaps in the existing market as the Government rolls out its automatic enrolment programme which will eventually see up to 10 million people placed into workplace pensions.
But there have been widespread calls for the rules around Nest to be relaxed amid concerns that many employers will be unable to use Nest as a single pension for their whole workforce.
The current rules, which are due to be reviewed in 2017, also prevent workers from maximising their savings by piling up larger amounts of cash in their pension as they approach retirement, it has been argued.
Committee chairwoman Dame Anne Begg said: "Some employers are dismissing the Nest option and choosing a private pension provider who can offer a scheme for all their employees.
"Nest is required to be a low-cost scheme and to offer good value. Other pension providers don't have this same obligation.
"There is therefore a risk that the restrictions will mean some employees are prevented from having access to the best value pension scheme available."
Auto-enrolment began last autumn with larger companies in a phasing-in process. The committee said that the Government must act now to give smaller firms which are being enrolled from next year time to prepare.