NEST – Common Sense Prevails

by | Oct 7, 2014

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We can all breathe out.  At long last, the Government has confirmed that the ridiculous remaining restrictions on annual NEST contributions are to go.

Pensions Minister Steve Webb has announced that the current cap of £4,600 a year will be history after 1st April 2017, and that the inward transfer of funds – such as from a previous pension – will no longer be forbidden.

So why did it take so long? We mean, since automatic enrolment is already cracking the whip behind the Government’s drive to get people saving? Unfortunately, it looks as though Brussels may have been to blame.


“I am pleased to announce the government intends to remove the annual contribution limit and transfer restrictions on NEST,” said Mr Webb as he made the announcement on 8th September. “This is a common sense decision. By convincing Europe to support us, we’ve achieved a victory for consumers.”

The View From Brussels

So far, so cryptic. What it’s all about is that the European Commission has been cagey up till now about letting state-funded pension schemes like NEST do too much, in case they should distort or even threaten the prospects for competition from private pension firms. But the Commission has now accepted assurances from David Cameron’s Government to the effect that the scheme won’t be allowed to interfere – and, more to the point, that shackling NEST now would make it practically impossible to deliver its auto-enrolment commitment on time.

“The UK is concerned that, due to these two constraints, SMEs will expend resources seeking alternative automatic enrolment provision but find they have no alternative to NEST very late in the preparation timetable,” said the document ( “This would undermine its ability to deliver its SGEI effectively during the introduction of automatic enrolment and consequently damaging confidence in the pension reforms more generally.”


“Removing the cap on contributions by April 2017 means that the cap will be gone before minimum contributions increase from their current level (2%) to 5%,” said NEST chief executive Tim Jones. “”That not only simplifies things for employers, but also helps NEST members in building up their pots in the longer term.”

The industry itself is right behind the Government here. “Auto-enrolment is working better than expected,” said Tom McPhail from Hargreaves Lansdown on 8th September. “The argument in favour of artificially restricting NEST’s ability to compete directly with its pensions industry peers is no longer relevant.”

National Employment Savings Trust (NEST), which was established by government as part of the 2008 auto-enrolment reforms, is a national defined contribution workplace pension scheme specifically designed to be available to all employers so as to help them meet their new duties. At present the scheme has over 1.5m scheme members and works with over 8,900 employers.


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