PensionsJul 7 2016

Nest borrows extra £70m from DWP

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Nest borrows extra £70m from DWP

The National Employment Savings Trust borrowed an extra £72.5m from the taxpayer in the 2015 to 2016 tax year, bringing total debt owed to the Department of Work & Pensions to £470m.

That was almost half Nest’s total assets under management, which as of 3 July stood at £970m.

However, the new debt racked up by the auto-enrolment scheme was less than the 2014 to 2015 figure of £87.8m. It was also borrowed at a better rate - 2.85 per cent a year, compared with 3 per cent in 2014 to 2015.

Nest executive director corporate services Debbie Gupta told FTAdviser that, despite significantly adding to its debt to DWP over the year, she was “confident that Nesr will be delivered at no overall cost to the tax payer”.

Over the year, Nest paid the DWP £25.6m in interest payments, almost £4m more than the previous year.

But the scheme spent less on salaries and wages - £18.8m in 2015 to 2016 compared with £20.6m in 2014 to 2015.

The scheme’s new chief executive Helen Dean was the highest paid employee of those listed in the annual report, receiving an annual salary of between £210,000 and £215,000.

That was £20,000 less than her predecessor Tim Jones.

The scheme’s chairman Otto Thoresen received an annual salary of between £90,000 and £95,000, three times that of any other Nest trustee.

The annual report did not disclose the salary of Nest’s chief investment officer Mark Fawcett.

While the scheme cut down on staff costs, it spent more on business travel - £248,000 compared with £157,000 in 2014 to 2015.

Over the year the scheme also spent an extra £8.5m on software, bringing the total software spend to date to £80.2m.

As for the pension scheme itself, Nest reported it now has 3.3 million members, 135,00 signed-up employers, and 11,800 intermediaries signed up to Nest Connect.

It said the opt-out rate was 7 per cent.

The annual report was released the same day that the DWP launched a discussion paper on radically changing Nest’s remit, in particular expanding its default services into the decumulation phase.

In publishing the annual report, chair Otto Thoresen emphasised the scheme’s commitment to this area, as well as on the government’s “renewed focus on the quality and good governance of master trusts”.

“Responding to changes in how members can access their pension pots, we published our retirement blueprint, The future of retirement, which sets out our vision for helping members make the most of their savings when they come to take their money out of Nest.

“I’m proud of the role Nest is playing and the progress we’ve made this year,” he said.

While some in the private sector welcomed Nest’s focus on the decumulation phase - which would potentially include opening the scheme to individuals - others were less enthusiastic.

Aegon’s head of pensions Kate Smith, for example, complained that extending the scheme’s remit was unfair on private providers.

“It should be remembered that, unlike the pension industry, Nest is propped up by government loans allowing it to offer low-cost options. Extending Nest into the wider retirement income market, effectively subsidised by the taxpayer, will give Nest a competitive advantage,” she said.

AJ Bell senior analyst Tom Selby was also critical, describing the proposed development as “mission creep”.