In a report out today, the committee also calls for a ban on transfers in and out of NEST, urging the Government to introduce the necessary amending legislation as a matter of urgency.

Dame 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.”

The report highlights that NEST is ‘required to be a low-cost scheme and to offer good value’ while other pension providers don’t have this same obligation.

The committee say there is a risk that the restrictions will mean some employees are prevented from having access to the best value pension scheme available.

Begg continued: “The Government has already made clear that it will need to “fix” the issue of transfers in and out of NEST if it wishes to implement its “pot follows member” solution to the current problem of small pension pots. This makes the case even stronger for lifting the restrictions now.”

The report wants the Government to make changes now ‘before it’s too late’, and ahead of when small and medium employers have to start planning their entry into the auto-enrolment scheme.