In a report, Lifting the restrictions on NEST, published today, MPs on the Committee reiterate previous recommendations made to the Government, in November 2012, about lifting the restrictions. The report states it should be done now rather than remaining with existing legislation until it is reviewed in 2017.
NEST was established to offer a simple, low-cost pension scheme for employers and employees on low to moderate earnings when automatic enrolment into workplace pensions began.
NEST has a public service obligation (PSO) to be available to all employers who wish to use the scheme to meet their auto-enrolment requirements and to accept all individuals automatically enrolled into it.
However, in addition to the PSO, the Government placed a number of restrictions on NEST's operations.
The report claims the case for lifting the restrictions on NEST has become even more powerful since implementation of auto-enrolment.
It also states that these restrictions risk disadvantaging employers and employees, and preventing NEST from using taxpayers' money most effectively.
The Work and Pensions committee has said it sees no justification for continuing to inhibit NEST by persisting with the restrictions.
Anne Begg MP, chair of the Work and Pensions Select Committee, said: "Since auto-enrolment began, the case for lifting the restrictions has become even more powerful, and the need for action more pressing.
"For auto-enrolment to continue to work successfully, NEST must be allowed to thrive.
"Employers want simplicity. They want to be able to choose one pension scheme to cover all their employees. The cap on annual contributions to NEST means that employers can't opt for NEST for their higher earners or if they want to make more generous contributions.
"So, some employers are dismissing the NEST option and choosing a private pension provider who can offer a scheme for all their employees."
She added: "The Government must act quickly to provide the clarity that employers need in order to make the right choice for their employees."
TUC general secretary Frances O'Grady said this report puts "even more pressure" on pensions minister Steve Webb to lift the restrictions on NEST.
"The restrictions are a burden on both employers and workers," O'Grady said.
"Employees are being prevented from maximising their savings as they approach retirement. And employers with better-paid staff cannot use NEST as a sole scheme for their staff.
"With many more employers due to start auto-enrolling staff over the next few years, the restrictions should go as soon as possible."
