A happier old age. Government considers improving pension scheme for low paid.
The government is considering easing restrictions to a pension scheme specifically designed to help the low paid.
The surprise move comes just three months after a Bureau investigation suggested intense lobbying from the insurance industry left the National Employment Savings Trust (Nest) ‘fighting with one arm behind its back’.
The Department of Work & Pensions yesterday opened a consultation on whether restrictions imposed on the Nest should be lifted.
In July, senior insurance executives, two Whitehall sources and a number of pension campaigners told the Bureau that a low-cost, flexible pension scheme was watered down by the last Labour government.
Senior insurance executives admitted to the Bureau that they successfully won government concessions because they feared the introduction of Nest, which launched last month, would provide ‘unfair competition’.
Nest was established following Labour’s 2008 Pensions Act. It was formed to provide pensions for lower paid workers in permanent or temporary employment. Two-thirds of the UK’s private sector employees do not have a workplace pension, according to data from the Office of National Statistics.
It was hoped companies would automatically enroll their staff into Nest unless their employer chose to make alternative approved arrangements. This in turn would provide employees with a portable, single pot of savings they could take from one job to the next.
But the government withdrew proposals to introduce default enrolment into Nest despite clearance from Europe.
Insurers also successfully persuaded the last government that savers should be prevented from transferring any pension savings they may have built up elsewhere. This ensured pension companies did not lose revenue. The decision also had the effect of denying Nest scale.
Additionally, the government also imposed a £4,400 anniual cap on the combined contributions employers and employees can make to Nest. This means most employers have to administer two separate schemes when providing workplace pensions for high and low earners.
The government is now considering ditching the transfer ban and the limit on contributions and is inviting responses to a consultation.
Pension minister Steve Webb said: ‘We are already seeing the positive effect that Nest is having on the world of pensions.
‘Workers are being signed up for workplace pension schemes at much lower charges than in the past and firms have much more choice of provider than in the past. But we need to make sure that this continues as automatic enrolment moves on to smaller firms and that the constraints on Nest are not a barrier to good consumer outcomes.’