Master trust Nest has seen its income rise 75 per cent over the course of last year while its expenditure fell by £20m, leaving it well placed to weather the effects of the coronavirus pandemic, according to its latest annual report.
Scheme income rose to £107.3m this year from £61.4m in 2018-19, in line with expectations, due to increases in assets under management and average contributions, the report stated, while Nest’s membership rose to 9.1m from 7.9m members across the same period.
Though these increases led to a corresponding rise in the costs of scheme administration and fund management of 29 per cent, rising to £95.8m this year from £74.4m in 2018-19, net expenditure decreased over the year to £59.9m from £79m.
This was largely due to growth in scheme income, “after taking account of grant income, Nest Corporation staff costs, depreciation and amortisation”, according to the annual report.
The report anticipated further growth in scheme income and expenditure in 2020-21, and stated that expenditure “will continue to be funded from the government loan facility until repaid from the projected surpluses in future years”.
The report added: “Nest Corporation is well placed to repay its loan facility. The latest forecast, drawn up before the pandemic, has it breaking even in 2026 and repaying its loan facility by 2039.”
The report did acknowledge, however, that financial projections made prior to the coronavirus outbreak are likely to have been skewed by the pandemic, which has “introduced a number of uncertainties that may over time challenge some of the expectations and projections” set out in the report.
“Nest Corporation’s financial position will be affected by any changes in contribution volumes and ongoing investment volatility that occur as a result of the pandemic,” the report stated.
“It is still too early at this stage to make adjustments reflecting the impact of the Covid-19 crisis on longer-term projections. However, assessments have been made on the three key areas [impacts on scheme income, loan funding from government and wider auto-enrolment policy] that impact these long-range financial forecasts.
“These assessments concluded that Nest Corporation remains in a strong financial position."
In her statement for the report, Nest CEO Helen Dean wrote: “The impact of the global Covid-19 crisis on our members, employers and the wider economy will be felt for many months. We have taken steps to ensure Nest continues to support all our customers, in these challenging times and the years ahead.”
Benjamin Mercer is a reporter at FTAdviser's sister publication Pensions Expert