'Nest deficit will be £280m by launch'
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The National Employment Savings Trust Corporation will have racked up a deficit of around £280m by the time the scheme launches in October 2012 if it proceeds with the Tata contract, Standard Life has calculated.
The latest accounts show that the Personal Accounts Delivery Authority, which became Nest Corporation this week, is now in debt by £41m, up from £6m last year.
Based on the accounts, if Pada continues to spend at the same rate, the scheme will launch with a deficit of around £130m. However, the accounts omit the £24m contract signed with Tata. From October, if the Government proceeds, the second stage of the contract will cost £575m over 10 years.
Assuming it does go ahead, Standard says Tata’s costs in the run-up to launch will total £140m - two years at £57.5m plus £24m for the interim contract and interest of around £10m - bringing Nest’s total opening deficit to £280m.
Standard Life head of pensions policy John Lawson says if Nest acquires one million members in 2012/13 paying £1,000 each, neither the 2 per cent charge nor the 0.3 per cent annual management charge will make a dent in the deficit.
A spokeswoman for Nest says there are too many variables to predict an accurate figure but says the Department for Work and Pensions has previously said the loan is likely to last around 20 years. Up until March 31, 2012, they estimated a loan in the region of £196m-£206m.
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Readers' comments (9)
Simon Booth | 8 Jul 2010 1:05 pm
I would have hoped that, with a change in Government, they would have taken the bull by the horns and binned this proposal.
We all know that, by the time NEST launches, the deficit will be way above the £200m level.
Wake up and smell the roses! There is definitely a need for compulsion, but the State is notoriously ill-suited for supplying the solution.
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Julie B | 8 Jul 2010 2:22 pm
Is it any wonder there's a gaping deficit when the level of salaries being paid out to NEST civil servants as revealed last week was....in one case £85K per annum for a commitment of 1 day a week's work!!!!...
Beggar's beleif how these people sleep at night!!
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Anonymous | 8 Jul 2010 3:23 pm
Compulsory payment (with NO opt out clause) into private pension savings has to happen from day one of an employees working life as long as we have an inadequate state pension, but there has to be a more efficient way of collecting contributions then through NEST.
Employers collect employees income tax & NI payments via the payroll system. Why not adapt this to collect pension contributions?
Compulsion together with the gradual phasing out of state means tested benefits has to happen.
Alternatively increase NI contributions for all, and provide an adequate state pension.
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Michael Fallas | 8 Jul 2010 3:29 pm
Money really must grow on trees, just wish I had known about it a long time ago!!
Oh yes and don't birds lay their eggs in NESTS.
Must be a NEST egg then !!
Great work if you can get it, shame we can't afford it.
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Greg Heath | 8 Jul 2010 3:31 pm
Come on people - why so negative. We all know that politians and the civil servants know the price of everything but the value of nothing.
That is why they have spent the last decade destroying the IFA services we offer all in the name of consumer protection.
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Julian Stevens | 8 Jul 2010 3:33 pm
Another monumentally expensive Old Labour white elephant. The best thing the new government can do is, without further delay, to consign this whole sorry and festering pile of garbage to the rubbish tip where it belongs and concentrate on undoing all the damage done by Labour to pensions since 1997.
Carrot is better than stick, and heaven knows employers don't need any further compulsory outgoings in the foresseable future.
NEST is just a terrible waste of time and money that many people, right from when it was first announced, said couldn't and wouldn't work.
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Duncan Philp | 8 Jul 2010 3:37 pm
This is another example of it's not my money who cares what it will cost. Why on earth are we putting in place another monolith which is going to be hopelessy in debt before it gets off the ground. If governments stopped haemorrhaging money like this we might not be in the financial position we currently find ourselves in. Come into the real world for a change.
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Anonymous | 8 Jul 2010 4:48 pm
How very depressing - I can't wait to escape from this hideous industry so I don't feel the need to read about these monstrous wastes of money any longer. It appears that the lunatics have completely taken over the asylum. I have lost count of the number of clients whose cynicism over pensions is now very deep rooted - I can't even be bothered to argue with them anymore!
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Steve | 9 Jul 2010 10:12 am
Where it is a "no brainer" that we all need to save more towards our retirement why do we need to spend 280 million on a "new, inflexible limited" vehicle when Stakeholder plans already exist and have done since 2001. Many company stakeholder plans have charges less than 1% is set up correctly and especially if they benefit from compulsory contributions and membership which is little more than this proposed white elephant. For this small additionmost will then recieve advice, flexibility and a more diverse range of funds to invest in. So what is the point of NEST as a product?
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