OUP of MPs will today call for the government to lift restrictions on a low-cost pension scheme, arguing it will create extra work for businesses and prevent employees from maximising the return on their savings.
Dame Anne Begg MP said a failure to lift the current limit on contributions to the National Employment Savings Trust (Nest) could mean “some employees are prevented from having access to the best value pension scheme available”.
Nest is the not-for-profit organisation set up by the government to meet the needs of small businesses and low earners – many of whom are poorly served by private providers – as the majority of workers are required to be automatically enrolled into pension schemes over the next four years.
However today’s report from the work and pensions select committee criticises the decision to limit annual Nest contributions at £4,400 per employee for competition reasons. It says many businesses will have to carry the burden of operating two parallel schemes for both high and low earners, adding complexity for businesses and workers.
There are also restrictions on withdrawals from Nest, affecting the ability of employees to combine their various pension pots into a more profitable whole.
“It is important that the government makes the decision to remove the constraints on Nest as soon as possible, to give small and medium sized employers the certainty they need before auto-enrolment begins for them in 2014,” the committee says.
Pensions campaigner Ros Altmann welcomed the findings: “Taxpayers have funded the initial set-up of Nest but the idea is that it should become profitable enough to repay the taxpayer loans. If Nest cannot take in enough assets, the cost of state aid to Nest is likely to be at least £379m.”
The government is due to decide whether to lift the restrictions later in the spring.