The National Employment Savings Trust Corporation will have racked up a deficit of around £280m by the time the scheme launches in October 2012 if it proceeds with the Tata contract, Standard Life has calculated.
The latest accounts show that the Personal Accounts Delivery Authority, which became Nest Corporation this week, is now in debt by £41m, up from £6m last year.
Based on the accounts, if Pada continues to spend at the same rate, the scheme will launch with a deficit of around £130m. However, the accounts omit the £24m contract signed with Tata. From October, if the Government proceeds, the second stage of the contract will cost £575m over 10 years.
Assuming it does go ahead, Standard says Tata’s costs in the run-up to launch will total £140m – two years at £57.5m plus £24m for the interim contract and interest of around £10m – bringing Nest’s total opening deficit to £280m.
Standard Life head of pensions policy John Lawson says if Nest acquires one million members in 2012/13 paying £1,000 each, neither the 2 per cent charge nor the 0.3 per cent annual management charge will make a dent in the deficit.
A spokeswoman for Nest says there are too many variables to predict an accurate figure but says the Department for Work and Pensions has previously said the loan is likely to last around 20 years. Up until March 31, 2012, they estimated a loan in the region of £196m-£206m.