Members of the influential Public Accounts Committee have criticised the Department for Work and Pensions and Nest for failing to explain how the scheme will pay back its multi-million pound loan.
In a report published today on automatic enrolment, MPs say they are “concerned that neither the Department nor Nest could provide a credible estimate of the time needed to repay the loan or for Nest to become self sufficient”.
MPs questioned both organisations following a National Audit Office report published in November which said Nest needed assets of around £20bn to be self-sufficient from its loan, currently £387m.
Nest assets stand at around £620m.
The reports says: “Nest does not know when it will pay back its loan, or how much this will eventually cost the taxpayer.”
It adds: “The Department has developed a complicated model in which Nest’s role and revenues will depend on how the wider market develops and the success of other providers. Given these uncertainties the Department and Nest were unable to give the Committee any indication of when Nest would become self-sustaining.”
The committee noted new plans to delay a rise in minimum contribution rates would further delay Nest paying back the loan.
It will ask the DWP to report back on Nest’s progress in repaying the loan in a year’s time.
Nest executive director of strategy Will Sandbrook says: “We are confident, as is the DWP, that the loan will be repaid in full and NEST will be delivered at nil cost to the taxpayer.”
The PAC report also raises concerns over the burden auto-enrolment places on small employers. It calls on the DWP to develop online tools to help firms with fewer resources comply with the regulations.
In addition, MPs say the Government needs to make the charge cap and disclosure requirements cover “all relevant costs to customers”. The 0.75 per cent charge on defaut funds does not currently cover charges such as transaction costs.