Pensions minister Steve Webb has pledged to legislate as soon as possible to remove the £4,500 cap on annual contributions and transfer restrictions on the National Employment Savings Trust, but the changes will not kick in until 2017.
His announcement was welcomed within the pensions industry, where some have lobbied for the constraints to be lifted immediately, claiming they prevented NEST from serving low to moderate earners and smaller employers. Webb said: 'I am pleased to say the reality is quite the opposite.'
The £4,500 limit, the ban on bulk transfers and limits to moves by individuals, had been designed so NEST focused on providing quality pension provision for its target market.
But Webb ordered a 'call for evidence' after the Commons work and pensions select committee recommended lifting the constraints at once.
Yesterday the minister of state said in his response: 'With over 250,000 members already, it is clear that NEST is a success. Targeting low to moderate earners that the market has traditionally forgotten, NEST has innovated with its use of language and investment strategy and has ensured that everyone has access to quality pension provision.
'That is why I am not making any changes until 2017, when automatic enrolment is fully rolled out. At this point I will lift the contribution limit so that NEST remains a force for good in the marketplace, driving up standards and best practice.
'The position on bulk transfers is much the same. As huge numbers of employers gear-up to start to enrol their workers, we need NEST to focus on getting these people in to pension saving. Once this is achieved and the market is established, the restrictions on bulk transfers will be lifted.'
The minimum combined employer and employee contribution will rise from 2% now to 5% in October 2017 and 8% in October 2018. Restrictions on individual moves will be lifted with the start of the 'pot-follows-member' regime, while a ban on bulk transfers will remain until the main roll out ends in April 2017.
Tom McPhail, head of pensions research at annuities broker Hargreaves Lansdown, said: 'It never made much sense to have a set of rules which were peculiar to one particular pension scheme and it has only been the vested interests of some within the pensions industry which have argued for their retention.'
Morten Nilsson, chief executive of NOW: Pensions, said: 'Ensuring that auto enrolment is a success is in everyone's interest and the clarity that today's announcement brings is helpful for both employers and the industry alike.'
