The anticipated 1 per cent cap on pensions charges will make the National Employment Savings Trust seem “expensive”, Ros Altmann has claimed.
The independent pensions consultant and former director general of Saga, said the expected report from the Office of Fair Trading - as at time of writing it has not yet been released - will recommend putting a 1 per cent charging cap on pensions.
According to Ms Altmann, this charge would “expose just how expensive Nest is”. She said: “The government established Nest as a national scheme that will ensure all employers can access a pension scheme for their staff.
“Taxpayers have already spent hundreds of millions of pounds setting it up. Yet this government-sponsored scheme charges more than double the 1 per cent cap for many workers, as Nest takes 1.8 per cent out of every worker’s contribution and there is then an ongoing annual charge of 0.3 per cent.”
She said it was understood that the Treasury had “insisted” on a high up-front charge in order to try to recoup the taxpayer loan to Nest - which had to be ratified by the European Union - as quickly as possible.
However, Ms Altmann added: “The value offered to Nest’s members has been compromised and the charging structure needs to be urgently rethought.”
The comments came after Kent-based adviser Andrew Oliver said that advisers were criticised for charging percentage fees based on the fund value of investments, but Nest is able to impose a similar charging structure of 1.8 per cent of initial contributions and a 0.3 per cent annual management charge based on fund value.
He said: “Why is this concept perfectly acceptable for a government-borne scheme but not for financial advisers?”