TUC General Secretary Brendan Barber said: ‘Today is an important milestone on the road to the new pensions settlement due to start in 2012. The supplier contract has been signed and we now know that the charging structure will combine an initial contribution charge and a long term annual management charge.
‘The charging structure strikes exactly the right balance. A contribution charge provides a sensible initial income stream that will help defray start-up costs. In the longer term savers will have the stability of an industry-standard annual management charge, set at an extremely competitive level.
‘There are inevitable start-up costs for a major project such as NEST. The staging and phasing of contributions and auto-enrolment – over a longer period than we would like – will delay the full flow of scheme income. While this has made some upfront charging inevitable, the aim should be to reduce this as soon as possible. The scheme’s initial savers should not have to bear the costs of the Government’s decision to put off the date when members and employers make full contributions.
‘In the longer term the 0.3 per cent annual management charge is exactly what is needed for the target group of low to average earners – too many of whom can only invest in pensions that eat up their savings with charges anything up to four times higher.
‘And the taxpayer can be reassured that EU rules ensure that there is no unjustified subsidy, even though NEST performs a real public policy objective and remedies a terrible market failure.
‘Getting the system up and running in 2012 is vital and it makes sense to start work with the main contractor now, just as it is right to allow a break after six months to allow for any post-election review.’
