Nest drew £78.9m in Department for Work and Pensions’ loans during 2010/11 as the Government-backed pension scheme geared up preparations for automatic enrolment in October 2012.
Nest Corporation’s annual report and accounts for 2010/11, published last week, reveal the scheme drew down net loan funding of £78.9m compared with £35.4m in 2009/10.
The accounts show that at March 31, 2011, the total amount owed by Nest to the DWP in loan repayments was £120m.
Nest expects to repay the loan within 20 years through its 1.8 per cent member contribution charge. The agreement will be reviewed in 2020. The loans are charged at the interest rate prevailing at the time the loan was taken out. At March 31, 2011 the average interest rate on loan funding was 7.3 per cent.
A Nest spokeswoman says: “The loan agreement provides funding for Nest for the next nine years, at which point the arrangements will be reviewed.
“Nest’s costs and revenues, and hence the amount and duration of the required funding, are to a large extent member volumes and are therefore not certain. On current assumptions, Nest is scheduled to pay its borrowing off within 20 years.”
Nest spent £30.8m during 2010/11, including £5m in interest payments on the DWP loan and £15.2m in staff costs. It also made advance payments totaling £27.6m to Tata Consultancy Services for the setting up of scheme administration services.
Nest chief executive Tim Jones says the uncertainty that surrounded the scheme following the 2010 general election disrupted preparations for auto-enrolment.
He says: “The period following the election was naturally one of some uncertainty, which generated an increase in staff turnover. This coincided with spending controls which were implemented to reduce public sector spending, including restrictions on recruitment and other types of spending such as the use of consultants.
“The resulting resourcing position for Nest affected the work programme and increased overall risk.
“With the conclusion of the review, we are past this period and we have agreed specific controls on spending for Nest which are consistent with the aims of the Government.”