Followers of this blog will be aware that the limitations imposed by legislation on NEST have been under review for some time now, and were subject to a formal consultation at the back end of last year.

For those not aware of the NEST restrictions, they currently stand as follows:

• A maximum contribution cap of £4,500 per annum, per employee.
• A restriction on transfers into the NEST scheme
• A restriction on transfers out of the NEST scheme

And today we have a formal announcement from The Minister for Pensions, Steve Webb MP, on this very topic. The full response statement can be viewed via the following link:

https://www.parliament.uk/documents/commons-vote-office/July_2013/9-July/10-DWP-Pensions.pdf

For those not keen on wading through the full statement, I can summarise as follows:

• The contribution cap will remain until 2017. Thereafter, and assuming this is passed in legislation, the contribution cap for NEST will be removed.
• Transfer restrictions on an individual basis remain as per the current situation for the moment. A separate piece of legislation is in train allowing for the automatic transfer of some pension monies (to avoid a large number of small pension pots as a result of auto-enrolment legislation). The actual timetable for this point will therefore be dictated by the progress of that item of legislation.
• The ban on bulk transfers will remain until 2017 and then be lifted.

My thoughts on this?

It has been the case for some years that the NEST restrictions would be reviewed in 2017 anyway, and it was generally assumed by most in the industry that this suggested that these limitations would be withdrawn at this point. We now know this is the intention, so this is a marginal acceleration of the existing plans only.

A more positive point is for employer’s who, allowing for the current NEST scheme structure and restrictions, have already made a conscious decision on a scheme to use for auto-enrolment purposes. There was a nagging concern that such employers might have to revisit such a decision if the NEST structure were to change ahead of schedule, and that possibility has now been removed thanks to today’s announcement.

All in all, this announcement should be welcomed as it provides a little more clarity to the auto-enrolment world that all employers must now embrace.

Best regards

Steve