Restrictions imposed by the European Commission on the amount that British workers can save towards their workplace pension scheme will be lifted, the government announced today.
The Department for Work and Pensions has confirmed that it intends to pass new laws to remove the annual contribution limit and restrictions transfers into and out of the government-backed master trust NEST (National Employment Savings Trust) following a year of negotiation between UK ministers and the commission.
From April 2017, savers will see the annual contribution limit of £4,600 lifted and the ban on individual transfers removed to coincide with the introduction of automatic enrolment.
Pensions minister Steve Webb said this was a 'common sense decision' to help people to save, giving certainty and confidence to employers choosing to use NEST.
'By convincing Europe to support us on this, we've achieved a victory for consumers,' he said in a ministerial statement.
NEST was set up by the UK government to support automatic enrolment. The scheme has a public service obligation to accept any worker auto-enrolled by their employer. In recognition of this, NEST receives state aid in the form of a subsided loan from the government. As such, the DWP in July last year sought confirmation that removing these constraints was not inconsistent with state aid rules.
Alongside this, the DWP carried out a consultation on the impact of the constraints.
Webb said: 'In response to the call for evidence on the impact of the annual contribution limit and transfer restrictions on NEST... the government has confirmed its intention to lift these two constraints in April 2017.
'Since [last year], the European Commission has considered and approved the modifications to the state aid case for NEST.
'Accordingly, we will commence a short technical consultation on draft legislation, this autumn, to remove annual contribution and the bulk transfer restrictions on April 1 2017. We also retain the option to remove the individual transfer restriction, from October 1 2015.'
NEST chief executive Tim Jones welcomed the lifting of the restrictions. 'This is welcome and timely confirmation that the restrictions on contributions and transfers will be removed by 2017, particularly with automatic enrolment now starting to affect medium and smaller employers.
'That not only simplifies things for employers, but also helps NEST members in building up their pots in the longer term.'
Tom McPhail, head of pensions research at Hargreaves Lansdown, noted that the original plan for NEST was to review the restrictions in 2017. 'The government could be accused of jumping the gun, however there are good reasons behind this decision,' he said.
But he observed that Webb was in a 'tearing hurry to get his pot follows member project' bedded in before the election and the NEST restrictions on transfers were an inconvenient complication in this context.