Lifting Nest restrictions should create a level playing field

In July, the government announced it will lift the restrictions on the National Employment Savings Trust (Nest), including the cap on pension contributions and a ban on transfers, in 2017.

The pensions industry, including Nest, has widely supported the move. Logan Anderson, head of customer relations at The Pensions Trust, said: “The removal of Nest’s restrictions is a good thing, because these act as a barrier to encourage greater savings among employers and their employees. [Prior to lifting the restrictions] it is perfectly feasible that an employee who wishes to make greater contributions won’t be able to do so because of the restrictions. This restricts the savings of members.” 

The move is a positive change for the pension savings of Nest members, but it could also signal the rise of the master trusts, pension schemes that are designed for multiple employers to use under a single trust arrangement.

However, Morten Nilsson (pictured), chief executive officer at master trust provider Now: Pensions, does not think lifting the restrictions is likely to affect the master trust market. “Obviously, I think Nest is competing mostly with us and [B&CE’s] The People’s Pension, but I think the restrictions open it up, so it could affect the rest of the pensions market as well,” he said.

Jamie Fiveash, director of customer solutions at B&CE, said: “I think the question here is really, what does the lifting of the restrictions mean for the pensions industry? Our view is that once lifted, the restrictions placed on Nest have a direct impact on all pension providers.”

But the government’s change does create a level playing field and puts the focus on good-quality pension provision for auto-enrolment. Nilsson added: “We think the government should look at the quality of all workplace pension providers, at least operating in auto-enrolment, and not focus so much on Nest, because Nest is just a tool, it’s not a policy. Auto-enrolment is the policy. What’s important is that it works well.”

Fiveash added: “The government should consider whether the extent of the current promotion of Nest is fair. In particular, for example, whether it should be solely Nest that is mentioned in The Pensions Regulator’s staging letters that are sent out to employers. We think the material should list all providers that meet certain quality standards and are open to all employers.”