Nest crisis if it signs up under 4.5 million
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The National Employment Savings Trust Corporation could struggle to stick to member charges of 0.5 per cent if the scheme attracts fewer than 4.5 million savers, according to Standard Life.
The Personal Accounts Del-ivery Authority announced Tata Consultancy Services as the successful bidder of the Nest scheme administration services last week and confirmed that the deal is worth around £600m for a 10-year period.
If the scheme signs up 4.5 million members, Standard Life head of pensions policy John Lawson says Nest has struck a good deal with Tata and should be able to go ahead with charges of 0.5 per cent.
But he warns that there could be problems if the scheme attracts fewer savers.
He says: “Assuming that Nest attracts 4.5 million savers, Pada has struck a good deal with Tata despite them being the only bidder left. This should allow Nest to go ahead with charges at 0.5 per cent. However, if Nest only attracts two million savers, the financial may not stack up.”
The Tories have expressed outrage that taxpayers will have to fork out £25m for the Tata contract, even if the Nest scheme is scrapped.
Shadow pensions minister Nigel Waterson told Money Marketing last week that the Government’s plan to sign the Tata contract at the end ofMarch would not inhibit the Conservatives’ review of Nest.
In the House of Commons last week, Waterson said: “Jeannie Drake, an estimable member of the original Turner commission and chair of Pada, was quoted as saying the cost of cancellation of this contract would be ’only some £25m’.
“I appreciate that £25m might seem like small change in the context of all the massive wast-age of public money for which this Government has been responsible but I think we need to get back to a regime in which it sounds like quite a lot of money.”
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Readers' comments (3)
Julian Stevens | 11 Mar 2010 4:32 pm
The NEST scheme is just a huge white elephant. Only one bidder for the administration, still no idea about where the money will be invested, all the glaring problems with the present pensions framework completely ignored, no encouragement to the private sector to come up with a better alternative (which it could, if properly incentivised). It's all rubbish. The only people making any money out of it are those on the PADA committee being paid huge salaries at the expense of the tax payer.
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David Trenner - Intelligent Pensions | 11 Mar 2010 5:38 pm
Julian
Do you ever wonder if you are a being a trifle negative?
NEST is essential for the next generation of employees who will have no other pensions apart from Basic and S2P.
Now, if only Norman Fowler had not made it possible to opt out of employers' schemes ...
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George Sorars | 11 Mar 2010 8:59 pm
Where will the toiling masses have their money invested, has that been decided yet?
As you do not get a TV and you cannot shift it to a better performing provider, you just know this thing is going to wither on the vine when people soon realize they effectively shoving their wages into a big black hole, based appropriately presumably in Calcutta?
Plus just think of all the adverse publicity that will soon attach to the whole project as the political class just cannot ignore the limitless opportunities for corruption, as they invest the peoples money in the shares of the companies of their croney capitalist mates.
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