The National Employment Savings Trust Corporation could struggle to stick to member charges of 0.5 per cent if the scheme attracts fewer than 4.5 million savers, according to Standard Life.
The Personal Accounts Del-ivery Authority announced Tata Consultancy Services as the successful bidder of the Nest scheme administration services last week and confirmed that the deal is worth around £600m for a 10-year period.
If the scheme signs up 4.5 million members, Standard Life head of pensions policy John Lawson says Nest has struck a good deal with Tata and should be able to go ahead with charges of 0.5 per cent.
But he warns that there could be problems if the scheme attracts fewer savers.
He says: “Assuming that Nest attracts 4.5 million savers, Pada has struck a good deal with Tata despite them being the only bidder left. This should allow Nest to go ahead with charges at 0.5 per cent. However, if Nest only attracts two million savers, the financial may not stack up.”
The Tories have expressed outrage that taxpayers will have to fork out £25m for the Tata contract, even if the Nest scheme is scrapped.
Shadow pensions minister Nigel Waterson told Money Marketing last week that the Government’s plan to sign the Tata contract at the end ofMarch would not inhibit the Conservatives’ review of Nest.
In the House of Commons last week, Waterson said: “Jeannie Drake, an estimable member of the original Turner commission and chair of Pada, was quoted as saying the cost of cancellation of this contract would be ’only some £25m’.
“I appreciate that £25m might seem like small change in the context of all the massive wast-age of public money for which this Government has been responsible but I think we need to get back to a regime in which it sounds like quite a lot of money.”