Confederation of British Industry slams Nest charges
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The Confederation of British Industry has attacked the Government claiming the National Employment Savings Trust’s “high and complicated charges” could deter millions of savers.
The Department for Work and Pensions announced last month that Nest will charge 2 per cent on all contributions as well as an annual management fee of 0.3 per cent until the costs of setting up the scheme have been covered.
Pensions Minister Angela Eagle (pictured) says this will take “in the region of 20 years”.
But the CBI says businesses are concerned staff will “baulk” at the proposed charging structure as it loads fees towards those saving in the earlier years.
The trade body calculates that for the first 16 years a saver contributing £1,000 per annum would be better off in a private sector scheme with an annual management charge of 0.4 per cent than in Nest.
Even an AMC of 0.6 per cent will be more attractive than Nest for the first six years, it says.
According to the CBI, Nest is cheaper over the longer term but it warns many employees will not realise this and opt out soon after being auto-enrolled.
Deputy director-general John Cridland is calling on the next government to review the structure of the fees.
He says: “Nest is a key part of extending the offer of a good pension to everyone in the private sector. The scheme is meant to be low-cost and easy to understand, so that it spurs people to start saving. But the risk is that many staff will think they are getting a raw deal and will quit the Nest scheme.
“The next government needs to revisit the structure of these fees. We must make it easier for the low-paid to save by smoothing the cost, instead of front-loading it. The pensions timebomb is ticking loudly and more people must be encouraged to save.”
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Readers' comments (12)
How funny!! | 19 Apr 2010 9:34 am
This has been a bloody disaster from the outset.
Stakeholder, whilst being cheap-as-chips failed because no-one was interested and also because the underlying fund ranges (and fund perfromances) were crap.
Everyone focuses on charges. What about fund performance?? I'll take a fund with an AMC of 4% - if it gave me a net return of say 10% - over one with an AMC of 0.4%, but barely struggles to break even!! Charges are NOT the be-all-and-end-all. Period.
That said, this is typical of New Labour.
New Labour = 'we are right. end of. you will do as you're told. it IS right (even if it isn't' ... ...
They simply don't listen to reason and to people/experts who can advise them a lot better ... ...
(on a non-pension related issue ... look at the Millenium Dome ... people said, build it high, so you can see London (just look at the Eiffel Tower, CNN Tower, etc), but no ... Labour had to build the thing flat ... like a cricket pitch ... well done ... cost us a shed-load, eh ...
... whatcha think will happen with ALL the pensions disasters c/o New Labour (ie simplification/tax credit raid/etc)??
PLEASE don't vote these idiots back in ... ...
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Anonymous | 19 Apr 2010 9:45 am
That's what you get when non industry people think they can do things better.
Another farce from the government.
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Robin Hood | 19 Apr 2010 9:56 am
The target audience who will 'baulk' at NEST will not be baulking at the charges. They will be baulking at the fact thay are being asked to save at all when holidays, sky tv and other short term consumable products are so much more important.
The government, the FSA and most importantly the population need to understand that current levels of retirement provision mean that many face a long and uncomfortable retirement relying on inadequate state provison that is already under severe pressure.
True compulsion and the removal of means tested disincentives may be the only option to make some save.
For those who have realised the situation they face a return to the original A day proposals may help.
Arguing about NEST charges is probably a sideshow set against the problems of the bigger picture.
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Anonymous | 19 Apr 2010 10:26 am
People will baulk at Nests as they have done with all pensions as long as we live in a society where the state will provide for those who refuse to take responsibility for their own lives. As ever, the middle classes will pick up the tab for the irresponsible - so no change there. It has never been about charges as Stakeholder has proven its about compulsion.
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Julian Stevens | 19 Apr 2010 11:13 am
NEST is just a sorry, cynical and chronically wasteful attempt to distract attention from Old Labour's obstinate refusal to address all the things about the current pensions framework that really need fixing. Charges aren't the issue and quasi-compulsion isn't the solution.
Aside from that, the NEST scheme is all academic anyway. Unless or until Old Labour (which in all probability will be out of office in a few weeks) finds anyone to handle the investment side of things.
Anyone planning to vote Labour on May 6th simply doesn't understand how much damage Crash Gordon's inflicted on so many aspects of the UK economy. That or they're plain stupid.
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How funny!! | 19 Apr 2010 11:24 am
This has been a bloody disaster from the outset.
Stakeholder, whilst being cheap-as-chips failed because no-one was interested and also because the underlying fund ranges (and fund perfromances) were crap.
Everyone focuses on charges. What about fund performance?? I'll take a fund with an AMC of 4% - if it gave me a net return of say 10% - over one with an AMC of 0.4%, but barely struggles to break even!! Charges are NOT the be-all-and-end-all. Period.
That said, this is typical of New Labour.
New Labour = 'we are right. end of. you will do as you're told. it IS right (even if it isn't' ... ...
They simply don't listen to reason and to people/experts who can advise them a lot better ... ...
(on a non-pension related issue ... look at the Millenium Dome ... people said, build it high, so you can see London (just look at the Eiffel Tower, CNN Tower, etc), but no ... Labour had to build the thing flat ... like a cricket pitch ... well done ... cost us a shed-load, eh ...
... whatcha think will happen with ALL the pensions disasters c/o New Labour (ie simplification/tax credit raid/etc)??
PLEASE don't vote these idiots back in ... ...
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Anonymous | 19 Apr 2010 11:30 am
I totally agree with the comments from "Robin Hood" and the annonymous commentator thereafter.
OK charges are important (I wish I could find a fund that produced year on year growth of 10% "How funny") but this is not the real issue.
NEST will fail because people will opt out of it when they see their take home pay reduced. Simple. Most people want instant gratification and can't see beyond next week let alone 20 years plus.
Two solutions.
One provide a good earnings related State Pension scheme for ALL
Two make private pension saving compulsory for ALL.
Number one, won't happen, so that leaves two then.
The problem is Labour are completely incapable of making any correct decision on pension issues.
Please put your ticket in the right box.....
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Mmmm!! | 19 Apr 2010 11:32 am
Ah, Julian ... possibly plain stoopid ...
It is often said that in certain parts of the country, you could attach a red rosette to a hamster/guinea pig/whatever and the people will still vote the creature in ... ... sad ... but true ...
Actually, I honestly think the hamster/guinea pig/etc would do a much better job anyway ...
And ... could it be that these are areas where there is a larger proportion of people on state benefits?? They're not going to bite the hand that feeds it, are they ... ... ?? So compulsion is a very muc lost argument ... ...
Sadly there will come a point (as with civil service pensions) that the Gov has to say, sorry, we just can't go on supporting you (and your 'lifestyles') you anymore ... you're on your own ... ...
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John Blackmore | 19 Apr 2010 12:47 pm
The charges are not complex nor too high. Just make it compulsory. No one has the right to be poor and then expect me to pay for them in old age.
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John Blackmore | 19 Apr 2010 3:15 pm
@ Mmmm!!
where I live you could put lipstick on a pig and the Tory would still win.
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