The House of Commons’ work and pensions committee has recommended lifting the contribution cap and the pension transfer ban on the operation of the national employment savings trust (Nest).
The report, Automatic enrolment in workplace pensions and the national employment savings trust, recommended removing the two restrictions as a matter of urgency.
The committee said that the cap on the annual contributions an employee can make into a Nest scheme could result in severe complexity for organisations, because it means that employers with higher-paid staff could not use Nest as their single pension scheme.
The committee said that the ban on employees transferring existing pension pots into Nest will be disruptive, both for the employees who would like to consolidate separate pension pots into their Nest scheme and for employers that would like to operate a single workplace pension scheme.
Anne Begg, the chair of the Work and Pensions Select Committee, said: “Auto-enrolment is a welcome reform that will encourage high participation in workplace pension schemes.
“We welcome the government’s overall approach and have made several recommendations designed to help make sure the programme is a success.
“By lifting these two key restrictions placed on Nest, the government would remove barriers that might currently prevent employers from choosing Nest as their pension scheme, as well as making it easier for employees to bring together the other small pension pots they are likely to have.
“This will help reduce the multiple administrative charges that many people pay and help them to understand the total retirement savings they will have built up.”
The report also:
- Urged the government to proceed with its plans for state pension reform and introduce a bill to this effect at the beginning of the 2012-13 parliamentary session.
- Recommended that, from 2013 onwards, if some auto-enrolment pension schemes still have hidden charges, or charges that represent poor value for money, the government should use its powers to intervene.
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