Pensions minister Steve Webb has defended Nest’s cautious investment strategy.
The Nest default fund will target long-term investment returns of the CPI plus 3 per cent.
Webb said: “The received wisdom is if you are young and you are investing for 40 odd years, you can be quite risky because although the value could fluctuate it has time to rise over time.
“But Nest asked young people if they minded their pot size fluctuating and as soon as they saw a statement one year that showed their cash had gone down they said: ’who stole my money’. Nest came up with the idea that you are quite cautious in the early years to get cash growth. Some said it was too cautious but it was focused on young people.”