Participants in the National Employment Savings Trust, London, will not be forced to comply with a cap on contributions and also will be permitted to transfer existing retirement savings into the plan, beginning in April 2017.
The changes were announced Monday by Steve Webb, the U.K.’s pensions minister. The current annual contribution limit for participants at the £180 million ($290.5 million) plan is £4,600 a year.
“I am pleased to announce the government intends to remove the annual contribution limit and transfer restrictions on NEST, to ensure all businesses can be confident that this low-cost and easy-to-use scheme is among the options they can choose to enroll their workforce,” Mr. Webb said in a statement on the Department for Work and Pensions website.
“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,” said Tim Jones, CEO at NEST, in a statement following the announcement. “That not only simplified things for employers, but also helps NEST members in building up their pots in the longer term.”
The plan has more than 1.5 million participants and is working with about 9,000 employers.
The change followed a request for comment by the U.K. government on the impact of the two restrictions. The government said in July 2013 that it intended to lift the restrictions, which were originally made to keep the plan focused on its target audience of lower- to middle-income earners. The DWP said removal of the restrictions means NEST is now on a more level playing field with other defined contribution plans, with participants now able to consolidate their retirement savings.
The government will now begin “a short technical consultation on draft legislation,” beginning in the fall, Mr. Webb said.
The decision followed a year of negotiations between U.K. ministers and the European Commission, said the DWP in a separate news release, with the EC “recently” confirming that it would not oppose the removal.
