New low cost pension to help millions save for retirement

The Government has set out the expected charges for NEST (National Employment Savings Trust), which will give millions of people the opportunity to save to meet their aspirations for their retirement.

Minister of State for Pensions and the Ageing Society Angela Eagle said: "This is a fair and sensible funding package which delivers the Pensions Commission's vision of a low cost scheme in an affordable way.  It balances the needs of members, taxpayers and the interest of the broader pensions industry.  Market failure for low and moderate earners means they have not had access to a suitable low cost pension scheme and have not been able to save for their retirement.  NEST will put this right."

NEST will meet the Pension Commission's ambition for a low cost scheme with an anticipated 0.3 per cent annual management charge over the longer term. To meet the costs of establishing the scheme, the initial level of charges will also include a small additional charge on contributions of around 2 per cent.

This is comparable to low charges currently being paid by members of large occupational schemes, and means low-to-moderate earners will have the opportunity to enjoy a level of charges that generally only higher earners and those working for larger firms can enjoy.

Until NEST is fully established, it faces an inevitable gap between costs and revenues. The Government has announced that it will make a loan to NEST to cover those costs, ensuring it is delivered at no overall cost to the taxpayer.

Lawrence Churchill, NEST Chair Designate said: "I welcome the Government's announcement. It demonstrates how NEST can deliver low charges to its members without putting a burden on taxpayers."