16 March 2010
The government has announced the expected charging structure for
the National Employment Savings Trust (NEST).
The government said NEST will meet the Pension Commission's
ambition for a low cost scheme with an anticipated 0.3 per cent
annual management charge of the value of the fund over the
longer term. However, to meet the costs of establishing the scheme,
the initial level of charges will also include a small additional
charge on contributions of about 2 per cent.
The government said it was "comparable to low charges currently
being paid by members of large occupational schemes."
The Department for Work and Pensions (DWP) said until NEST is
fully established, it faces an "inevitable gap between costs and
revenues."
The government announced it will make a loan to NEST to cover
these costs, ensuring it is delivered at no overall cost to the
taxpayer.
Pensions Minister Angela Eagle said: "This is a fair and
sensible funding package which delivers the Pensions Commission's
vision of a low cost scheme in an affordable way. It balances the
needs of members, taxpayers and the interest of the broader
pensions industry. Market failure for low and moderate earners
means they have not had access to a suitable low cost pension
scheme and have not been able to save for their retirement. NEST
will put this right."
NEST chairman designate Lawrence Churchill said: "I welcome the
government's announcement. It demonstrates how NEST can deliver low
charges to its members without putting a burden on taxpayers."
Personal Accounts Delivery Authority chief executive Tim Jones
welcomed the announcement.
He said: "This announcement enables us to deliver on the Turner
Commission's commitment to provide a low-charge scheme for
low-to-moderate earners, helping to ensure the successful
establishment of the scheme. This charge structure, which we expect
to include a 0.3 per cent annual management charge, plus a charge
on contributions of around 2 per cent, secures low charges for
future NEST members.
"NEST will be a pension scheme that will extend low charges to
millions of people across the UK who currently have no access to
pension saving."
"The level of charges indicated is comparable to those currently
employed by members of many large workplace schemes and will ensure
people on low-to-moderate incomes have the same opportunity to
access low-charge workplace saving."
