The National Employment Savings Trust (NEST) £4,400 contribution cap may prevent some of its members from achieving adequate retirement income, according to the Pensions Policy Institute (PPI).
In its paper, The impact of the NEST contribution limits and restrictions to transfers, the PPI argued the government should remove the low-cost pension provider's constraints when auto-enrolment is fully implemented in February 2018.
While the current contribution cap is "sufficient" for most people on low to median incomes to build retirement savings, PPI analysis showed older workers with no savings history were more likely to be constrained by the limit. Employees who wish to save more than the minimum contribution rate will also be hit.
The paper said: "DWP's analysis has suggested a salary of £60,000 as the level at which employees are likely to breach the contribution limit; however, this is based on the assumption that total employees' and employers' contributions in all years will be no higher than 8% of the employee's salary, from the lower limit of £5,564.
"In practice, people may wish to make higher contributions, meaning that individuals on lower salaries than £60,000 may breach the contribution limit."
Employers with higher earners who do not want to run two workplace schemes may decide to reject NEST as an option, which could "lead to reduction of choice of pension schemes for employers and, ultimately, poorer value for employees", PPI said.
Last week, the Work and Pensions Select Committee called on the DWP to lift NEST's transfer and contribution restrictions "as a matter of urgency".
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Via The Exchange
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