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Nest refuses to reveal fund manager fees

Nest has refused to release details of the fees charged by its investment fund managers due to concerns that the disclosure would “prejudice the commercial interests” of the scheme.

Responding to a freedom of information request from Money Marketing, Nest concedes that releasing the information would improve transparency and accountability of its activities and the procurement decisions it takes.

However, it says revealing the fees would hamper negotiation of future fund management mandates. Nest says the decision was also influenced by the fact that fund manager charges will be paid for by scheme members rather than the taxpayer.

Nest says: “The disclosure of this information would also prejudice the commercial interests of the fund managers in question because charges payable by clients for fund management services are closely protected within the industry and disclosure would place fund managers working with the Nest Corporation at a significant commercial disadvantage.”

Syndaxi Chartered Financial planner managing director Rob Reid says: “It is ironic, given the current discussion on the lack of full disclosure of charges, that we have a Government-sponsored arrangement that does not want to tell us what the individual fund manager charges are.”

UBS, State Street Global Investors and BlackRock will manage the five investment mandates to be used by Nest’s default fund.

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. It’s probably because the charges are higher than Stakeholder. The FSA currently think that anything higher than 1.5% is “Unsuitable” and they don’t want tto let on that this could be “Unsuitable” in the eyes of the FSA

  2. I will have to wait and see their full response to properly examine NEST’s rationale not to disclose at this time before they are live with their offering. Surely though NEST will be required to disclose to a prospective member of their scheme prior to the member being enrolled exactly what the terms of the scheme are? The member and the employers’ advisers will also have to know these terms and in order for us to know them they will have to be clearly set out in unbundled form—fund manager charges, establishment charges etc. I THINK the establishment charges are to be 2%?
    Thinking about it is there not a commercial imperative for NEST to reveal the charges for membership prior to its launch on the basis that it is to compete with other offerings and so its terms should be made clear to the market as soon as they are known so that competing schemes may be allowed development/reaction time before NEST’s launch?

  3. Michael Fallas 7th April 2011 at 4:05 pm

    One appreciates the point with regard to commercial interests but given we are all being forced into a “full disclosure” regime so clients know what they are paying for it does rather imply that NEST is excluded from such matters.

    It would also imply that these fund managers could offer lower charges to others or that their current clients are subsidizing those of NEST a bit like a “lost leader”, neither of which looks good.

    Is it not time we had more competition on fund management charges?

  4. In the words of the FSA .. is this really “clear, fair and not misleading”

  5. Ironic is not a word I would use ! Downright unlawful,against FSA principles of disclosure and blatently wrong is more to the point I believe.How can anyone advise on anything to do with Nest ,and advise clients on suitability of costs and charges when this sort of behaviour is condoned by the FSA.Typical !! Looks like another claim on the FSCS being set up to poor advisory firms who do not have the muscle of TATA when influencing Governments.

  6. Hypocrites. No doubt the powers that be will turn a blind eye to this, even tho it totally goes against TCF and transparency.

    Still, the fact that the advert next to it on the e-mail is for a plan with “transparent product charging, ready to use now and post RDR” gave me a smile…..

  7. Bonkers. The most “commercial” (presumably intended to benefit members) approach would be to fully disclose charges, then any alternative fund mgrs out there who can do it to the same standard and for less can pitch for it creating downwards pressure on costs. Why on earth would they not want this immediately?
    If nobody can do it for less than they are currently paying then what is the commercial gain they could hope for?
    And regardless of all that, how can members have any idea whether or not it compares well with alternatives if they dont know whether the fund mgr charge will be 0.2% or 2% per annum??

  8. Great, I can`t wait, what a battle there will be, finally the Government is going to get a taste of what it is like to fall foul of the mighty FSA. Get in there Hector, give em hell! Fine them and ask them to pay in to the financial advisors sector of the FSCS I am sure you can fit them in next to product providers, plenty of room.

  9. Tim Harrop-Griffiths 8th April 2011 at 10:42 am

    Are these fund management charges in addittion to the 0.3% AMC? If they are part of it it’s not that big an issue.
    If, on the other hand, they are in addittion to it then surely it’s unlawfull or, at the very least, against the spirit of the law?

  10. Paul 5.13pm.

    Logically you are totally correct. NEST really should be putting this contract out to tender, not ‘negotiating’ in secret with the tab being picked up by the consumer.
    Any tender process used should also be repeated on a three or five year cycle. That would mean the fee payers having some confidence that they are not being ripped off.
    Putting the fund management out to tender periodically would have the added benefit of keeping the contractor up to the mark and there is no reason why there could not be more than one fund manager appointed, thus giving an element of competition on performance, service and costs.

    Mind you it’s not as bad as the FSA who’s management merely estimate all their costs for any coming year and then ‘divi’ out those costs as they see fit for regulated individuals and businesses pay.

  11. The investment charges are included in the stated NEST charges or at least that was what was outlined from the start. So a non-issue.

    Perversity is that they actually think this stuff will say secret for long

  12. Performance related fees perchance… ??

    (Obviously there is something that they dont want ‘us’ to know yet)

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