‘Complex’ restrictions on the Government’s scheme to support the millions of workers who will be automatically placed into workplace pensions must be removed to ensure its success, MPs have warned.
The landmark initiative to tackle the pension savings crisis with the automatic enrolment of between nine and 10 million people into pension schemes begins this October with larger firms.
The National Employment Savings Trust (Nest) was set up as a low-cost pension scheme to help deliver the programme, but the Work and Pensions Select Committee warned rules governing Nest made it “impossible” to meet the needs of all employers and workers. It also said pension providers should be able to clearly show people are getting value for money and the pensions industry should develop a similar model to the comparison websites which help consumers to get the best value from insurance providers.
The committee urged the Government to remove a ban on people transferring their existing pension pots into Nest, which it said would be “disruptive” for employees who wanted to bring their small pension pots together as well as employers wanting to operate a single scheme.
It suggested that caps on the annual contributions people could make into Nest schemes should also be done away with as they meant employers with higher-paid workers could not use Nest as their single pension scheme.
The report, titled Automatic enrolment in workplace pensions and the National Employment Savings Trust, said the caps would result in “severe complexity” for businesses.
Tim Jones, Nest chief executive, said: “The restrictions have played out very much as the policy intended.
“They have focused Nest on creating a product for our target market of people earning up to £35,000 and you can see that in our product design, for example, in the way we use language and in our investment approach.
“In that sense they have been a good thing. The debate now is whether it’s a benefit or a detriment to retain them. Our job is to provide evidence of their impacts on employers and members to Government, and then to allow Government to take that view.” He added that there was some evidence to suggest that the restrictions were having “detrimental effects and unintended consequences”, such as restricting employer choice.