CBI director-general John Cridland has urged the Government to extend Nest’s loan repayment period, suggesting the current charging arrangements are “not cheap enough”.
The scheme, which is backed by the Government, will levy an annual management charge of 0.3 per cent and a contribution charge of 1.8 per cent.
In a speech last night, Cridland (pictured) said the DWP needed to “win a battle” with the Treasury to extend the repayment period of its £700m state loan.
He said Nest’s charges would need to be lowered to “justify its existence” because private providers are already delivering defined contribution schemes to the private sector with total annual fees of between 0.4 and 0.6 per cent.
He said: “Nest is not cheap enough. It has an effective 0.43 per cent annual charge, taking into account the annual management charge and the contribution charge, which I think it’s appropriate to do, given that the contribution charge is likely to be around 20 years, well beyond the foreseeable policy horizon.
“To justify its existence, and to recover the Turner ambition, Nest has to get cheaper. To do this, Nest and the Department for Work and Pensions needs to win a battle with the Treasury.
“The Treasury is insisting that the £700m loan it made to Nest be repaid quickly, and it’s this that has driven the design of the charge, based on the fact that it’s viewed as spending in the national accounts.
“But it’s a loan, on the balance sheet, and should be treated as such.”