Savers hit with hefty fees at Britain's biggest pension scheme

Telegraph

10 hours ago

Britain's biggest pension scheme is set to charge workers hundreds of pounds in additional fees because of delays in paying off its taxpayer-funded loan.
National Employment Savings Trust (Nest) levies a 1.8pc 'contribution charge' on its 13.8 million members to help pay off a £1.2bn debt to the Government.
The loan was initially scheduled to be repaid by 2032, but this was pushed back to 2038 because of slower than expected income growth.
The delay means a worker earning £50,000 who saves with Nest would pay an extra £440 in contribution charges over the seven-year period from 2032 to the end of 2038, analysis shows. A worker earning £100,000 would pay £945 more.
Nest was created in 2010 to ensure that all workers can save into a pension. The scheme was designed to be a 'low-cost' alternative to traditional pension funds.
However, industry experts have accused Nest of offering members and taxpayers poor value for money, as high fees are used to cover a mountain of debt and generous staff pay.
A previous Telegraph investigation found that six Nest employees are paid over £250,000 a year, while 17 earn more than Prime Minister Keir Starmer.
Nest levies an 'annual management charge' of 0.3pc on the total value of a pot each year, in line with rival pension schemes such as the People's Pension and Now Pensions.
Yet unlike with other providers, Nest savers also incur a second fee – a 'contribution charge' of 1.8pc on each new payment into their pot.
Nest has insisted that the contribution charge is levied on members in order to pay off the government loan taken out to set up the scheme. But it has refused to rule out keeping the charge, even once the debt has been fully repaid.
The loan was worth £171m in 2012, but annual interest and additional borrowing has meant the debt has now risen to almost £1.2bn.
Nest's latest annual report shows that it made a profit for the first time this year, and made its first £6m repayment towards the loan. It said that it was on track to fully repay the loan by 2038.
However, George Sweeney of Finder, said the initial repayment was 'a drop in the ocean' compared to the remaining balance, and that the 2038 repayment date was 'highly optimistic'.
He added: 'Even assuming the loan doesn't grow further – which it will, due to accruing market-rate interest – Nest would need to repay around £92m per year for 13 years. That's over 15 times the amount it repaid this year.
'The scheme is banking on continued growth in member numbers and assets under management to speed up its loan repayments.
'While Nest may experience continued growth, the scale up required to hit the 2038 repayment goal seems somewhat unrealistic.
'If Nest falls short, it's the members who will lose out, continuing to pay the fees that were supposed to help pay back this loan.'
Tom Selby, of wealth management firm AJ Bell, said: 'Nest's 1.8pc contribution charge was always an awkward compromise designed to help pay off its massive set-up loan, adding extra cost and complexity for members.
'While Nest eventually becomes a low-cost pension scheme for most people, the contribution charge clearly eats into that value and continues to be a running sore for the scheme.
'From the perspective of millions of hard-working pension savers, the sooner the loan is paid off and the contribution charge consigned to the dustbin, the better.'
Nest was approached for comment.