People who start saving into the national employment savings trust early on will end up subsidising those enrolled later, Towers Watson has warned.
Nest is set to charge members 2 per cent of all contributions on top of a 0.3 per cent annual management charge until the costs of setting up the scheme have been met but the Department for Work and Pensions will not give an estimate of when these costs will be paid off.
Towers Watson says that for someone enrolled in 2014 who contributes at the default rate for five years and then retires, the dual charge would be almost equivalent to a 1.5 per cent AMC.
Senior consultant Paul Macro says: “Nest should be cheaper but early joiners who are close to retirement face the sort of charges that the Government always said were unacceptable.”
Standard Life calculates Nest members will need to save into the scheme for 18 years for the dual charge to be better value than a 0.5 per cent AMC.