Amid growing concerns that the annual contributions limit for Nest will not be effective in meeting the scheme’s policy intentions and stated objectives, the Government has hinted it may scrap the contributions cap.
According to reports appearing in the media, an email sent by the Association of the British Insurers (ABI) revealed that officials at the Department of Work and Pensions (DWP) are under pressure to reconsider the £4,200 annual limit set for the scheme as a small group of voluntary employers start making contributions this summer.
“As a result of recent press coverage, the DWP now feel under pressure to look again at the Nest contribution limit”, the ABI mail says.
“The annual limit is designed to focus Nest on its target market of individuals who the existing industry currently finds it difficult to serve, therefore complimenting rather than replacing existing provision”, it says, adding “The DWP is concerned that the limit will not be effective as it could be in achieving the policy intention and would like feedback”.
Under the current plan, the government will review the contribution cap annually in accordance with the average income reported for the year. The government will subsequently phase out the contributions cap completely in 2017.
“The DWP is concerned that the limit will not be effective as it could be in achieving the policy intention and would like feedback”, said a DWP spokeswoman indicating that the rules are indeed being reviewed.
“However, we think it is sensible not to legislate now and to see how the reforms roll out and assess the impact of the contribution limit on Nest and the industry in light of that”, she added.
“We cannot comment on Government policy. The current cap is £4,200, meaning someone on average earnings of around £25,000 could contribute much more than 8 per cent without hitting that limit”, a Nest spokeswoman said, refusing to give further details.