UK – The National Association of Pension Funds (NAPF) has welcomed the UK government's consultation on the constraints on the National Employment Savings Trust (NEST).

The Department for Work & Pensions (DWP) published yesterday a "call for evidence" on the impact of the annual contribution limit and transfer restrictions on the auto-enrolment provider.

Darren Philp, NAPF director of policy, said: "The economic landscape has changed significantly since the auto-enrolment reforms were legislated, so there is a case for reviewing the restrictions if the evidence shows they are acting as a barrier for employers wanting to use NEST or for employees getting value for money."

Competitors to NEST say that since the organisation benefitted from a £600m (€750m) low-interest rate loan from the government, some restrictions are necessary to create a level playing field for other providers.

But Philp pointed out that the contribution and transfer constraints were not the only rules NEST had to abide by.

"Other requirements on NEST that limit its ability to compete with other providers in the market, such as its public service obligation to serve all employers, will remain in place," he said.

Adrian Boulding, pensions strategy director at Legal & General, said he believes the consultation is unlikely to result in any removal of the constraints on NEST.

"I think they'll stay in place until 2017, which is when the government has scheduled a review as to how auto-enrolment is working," he said.

The call for evidence was about looking at the market to see what was happening, he said.

"We are seeing NEST very active in the marketplace, and we're not seeing any evidence that the restrictions are stopping NEST," he said.

The restrictions were meant to keep NEST focused on its target market, and it was important that the provider maintained such a focus, he said.

"The danger for the public is that, if NEST is no longer focused on its target market, small employers with low-paid workers could find it very difficult to find a provider because NEST will have gone off chasing other customers," he said.

Meanwhile, Morten Nilsson, chief executive at Now: Pensions – the auto-enrolment provider set up by Danish pension fund ATP – said it was surprising the government was launching a new consultation into this issue.

"We need stability, so people know what the rules of the game are," he said.

"In principle, clarity is good for NEST but also for the employers and competitors."

However, Nilsson said the real issue was whether all the pension providers in the auto-enrolment space had viable business models.

"If you have a business model that is based on having these restrictions, then you should be fine," he says.

"But if that is not the case, then it's a different issue."

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