Nest reveals lower charging structure than anticipated

Posted on November 25th, 2010 | Categories - Pensions

Nest will incorporate a contribution charge, which is lower than the 2% predicted.

Employees paying into a Nest pension scheme will have to meet a contribution charge.

The National Savings Trust (Nest) has unveiled a lower charging structure to its pension scheme than expected.

The scheme will include a combination of a 0.3% annual management charge (AMC) and a 1.8% contribution charge, which is 0.2% lower than had been indicated by the Nest Corporation in March this year.

This means that for every £100 saved by an employee, £1.80 will be deducted as part of the contribution charge.

The contribution charge, which is not incorporated in traditional pension schemes, will generate the cash needed to meet the costs of establishing the new pension system. Once these costs have been met the charge will be removed.

Helen Dean, Nest managing director of scheme development said: “We’re very pleased with the charges that we’re setting today. We believe that this is a very, very good charge level… We think this is great news. It means that the members of Nest will have access to a scheme that will charge a level approaching the best of those around”.

John Lawson, head of pensions policy at Standard Life said it is difficult to compare the structure of Nest with other existing schemes because they only have an AMC and not a contribution charge. He said: People in the short-term would probably be better off with a scheme that only has an AMC but if they are in a scheme for the long-term e.g. 20 years then they would be better off in Nest”.

“Nest said that the contribution charge will fall away within 20 years but this is dependent on many variables such as the amount of members it has, the average contributions etc”.

He added that “if not many people join, the contribution charge will form part of Nest’s charging structure for a lot longer”.

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