The pensions provider argues the proposed Nest charging structure is inconsistent with the stakeholder pricing structure which has effectively meant providers have been unable to take any contribution charges since the launch of stakeholder 10 years ago, leading to long payback periods.
Friends Provident says the 0.3 per cent AMC charge initially proposed when personal accounts were first considered would have meant generous subsidies for Nest from the government, so welcomes the introduction of contribution charges as it means Nest will now be competing on a fair basis with the existing market place.
The provider says the 2 per cent contribution charge will continue for a substantial period given the timeframe over which the contributions and funds build up.
Martin Palmer, head of pensions marketing at Friends Provident says: “It is telling that when the government has to fund the large development outlay for Nest, they have come to the conclusion that a contribution charge is required to reduce payback periods. It is disappointing that it has taken the government 10 years to come to this conclusion.”
“It is crucial the government is open about how long this contribution charge will last, and the assumptions behind this. It is important that people understand this before they start contributing to Nest – in the same way that providers have to fully disclose all their charges up front.”