Honister Capital remains “extremely concerned” about the structure of Nest following confirmation the scheme will go ahead as part of the 2012 pension reforms.
Nest will launch in low volumes next year in preparation for the roll out of automatic enrolment in 2012. By 2017, the Department for Work and Pensions expects the scheme to have between 3 and 6 million members.
However, the charging structure of the multiemployer scheme has effectively been “front loaded”, with participants charged 2 per cent on new contributions as well as an annual management fee of 0.3 per cent until the costs of establishing the scheme have been covered.
Honister Capital strategy & business development director Alan Easter says: “We are extremely concerned about the proposed structure of the new workplace pension scheme. A 2 per cent additional charge on initial contributions for what is meant to be a low cost scheme seems extremely high and heavily penalises those signing up first.”
He adds: “The Government is in effect providing a 20 year loan to set up Nest. But with uptake uncertain this is only an estimate of when the loan will be repaid from higher initial charges. It is a huge gamble to intervene in this way rather than making use of existing infrastructure.”