The Confederation of British Industry says Nest’s “high and complex” charging regime is preventing the Government-backed pension scheme competing with private sector rivals.
A report from the work and pensions select committee, published today, urges the Government to remove Nest’s restrictions “as a matter of urgency” because they create a barrier to employers choosing the scheme.
However, CBI director of employment policy Neil Carberry says Nest’s charging structure is also putting employers off using the scheme.
Nest has adopted a dual charging structure comprising a 0.3 per cent annual management charge and a 1.8 per cent contribution charge. The contribution charge is in place to pay back the scheme’s Government loan.
Nest argues it represents good value to members because charges come in below 0.5 per cent over the long term.
However, Carberry says: “We are seeing some concern from our membership about Nest’s high and complex charges.
“If you run the maths on Nest versus some of the alternatives that are available, it is clear that over quite an extended period of time Nest comes in more expensive.
“It takes about 10 years for Nest’s charge to come below 0.5 per cent but the average tenure of someone in a job in the UK is about 7 years.”