Last week, Nest revealed it would not charge a fee for members looking to transfer other pension pots into the scheme, once the ban on transfers into Nest is lifted in April.
That means any pots transferred into Nest after 1 April will only be subject to a 0.3 per cent annual management charge, one of the best rates in the market.
Nest's comparatively hefty 1.8 per cent contribution charge - which active members pay and which goes towards repaying a £500m loan from the government - will not apply to lump sum transfers.
Active members of the scheme who opt to transfer other pots will therefore only pay the 1.8 per cent charge on contributions made through their current employer.
Darren Philp, director of policy at competing auto-enrolment provider The People's Pension, said Nest's decision to allow members to transfer other pots in free of charge would "distort the market".
He told FTAdviser the decision highlighted the potential conflicts of interest springing from the government's funding relationship with Nest.
"The quicker Nest’s assets under management go up, the quicker the government’s loan gets paid back. So this is where the conflicts within the market are happening," he said.
Mr Philp argued transfers in should be charged a special management charge of around 0.5 per cent - the amount The People's Pension charges.
Tom McPhail, director of policy at Hargreaves Lansdown, said while the decision not to charge for transfers in would be "hugely beneficial" to members, he said it pointed "uneasily towards the £500m loan which remains the elephant in the room".
"A formal repayment structure would go a long way to allaying fears that the government will never recoup the money they have spent," he said.
While the 1.8 per cent contribution charge will ensure Nest remains proportionally one of the more expensive providers on the market for active members, for those looking to transfer in it will now be one of the cheapest.
FTAdviser surveyed a number of the major auto-enrolment providers, and none had a lower annual management charge than Nest.
Fellow master trust Now: Pensions also charged 0.3 per cent, while all others charged considerably more.
The People's Pension charged 0.5 per cent, Salvus Master Trust charged 0.6 per cent, and Smart Pension charged the maximum 0.75 per cent.
All of those providers apart from Smart Pension charged either an administration fee, or an employer charge, or both.
Smart Pension, which is part-owned by Legal & General, was the only master trust surveyed that charged neither an employer charge nor an administration fee.
Life companies Aviva, Standard Life and Legal & General had more complicated charging structures, because they negotiate specific deals with employers.
Of the three, Legal & General had the lowest maximum management charge of 0.5 per cent per annum for its default strategy. It had no administration or employer charge.
Standard Life charges members up to 0.75 per cent annual management charge, and no administration charge, while it charges employers up to £100 a month.
A spokesperson for Aviva said its management charges ranged from the teens to 75 basis points per annum, and that the average employer charge was £400 a year.
Nest's contribution charge, along with a contribution cap and a ban on transfers in, have up until now put many business advisers off recommending Nest to their clients.
Nigel Sycamore, director of auto-enrolment business advice firm Clear Workplace, said these features meant he only recommended Nest as a "last resort".
Responding to claims it was distorting the market, Nest chief executive Helen Dean said the aim was to help members with "modest" retirement savings to consolidate them in one place and "get good outcomes".
She said Nest expected the number of transfers to be "small" and the transfer values to be "modest in size".
"The Nest Trustee took into account its competition law obligations when setting the charge for transfers," she said.
james.fernyhough@ft.com
