The two per cent charge levied on contributions to the Government's National Employment Savings Trust scheme (NEST), which is estimated to last until 2030, will add to the challenge of persuading people that they will get value for money in the early years of the new savings plan.

The warning came from financial consultant Towers Watson after the Personal Accounts Delivery Authority (PADA) said last week that it foresaw the two per cent contribution charge to exist alongside an annual management charge (AMC) of 0.3 per cent "until the costs of establishing the scheme have been met." Once this has happened, the contribution rate is supposed to fall away leaving a flat AMC rate of around 0.3 per cent.

The Government was unclear at the time about how long the two per cent contribution charge would last, but a written answer to a parliamentary question published in Hansard, the edited verbatim report of proceedings in both Houses, details Pensions Minister Angela Eagle saying: "We anticipate that the total loan period, including the years in which NEST borrows from Government and the subsequent repayments, will last in the region of 20 years."

Early NEST savers will therefore see the contribution charge levied for between 14 and 18 years, due to the auto-enrolment duties rolled out to employers between 2012 and 2016. The contribution charge could, Towers Watson said, last for a longer or shorter time than this depending on how many members join the scheme and pay the charge.

"Psychologically, it may be very difficult for people to accept that £2 out of every £100 they save will be siphoned off to pay back a Government loan before it is even invested," commented Paul Macro, a senior consultant at the firm. "While it's only those close to retirement who are likely to face overall charges on the scale that NEST was set up to avoid, the general communications challenge will be much wider.

"It won't help to allay people's suspicions that the Government said nothing about how long the contribution charge would last when the charge structure was announced and smuggled this information out when all eyes were on the Budget."

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