Nest’s loan liability increases by £91m but on track to repay by 2038

Nest’s government loan liability increased by £91m year-on-year reaching £714m, up from £623m in March 2018, it has revealed.

Publishing its final results, Nest CEO Helen Dean said that the provider was “on track” to repay the loan in full by 2038, which is a year earlier than it predicted last year.

Nest Corporation, which was established in 2010 to ensure the running of the Nest Pension Scheme, is financed through a combination of a loan and grant income funding supplied by the Department for Work and Pensions.

In November 2010, the Corporation signed a loan agreement with DWP that provides assurance that future funding will be provided to Nest Corporation until income from scheme charges is sufficient to meet future costs and settle the loan liability. In March 2019 this loan agreement was amended and restated.

It predicts that it will be able to cover its operating costs from pension scheme member charges from 2026, at which point the estimated borrowings will be £1,158m.

In addition, Nest's pension scheme now has 7.9 million members and £5.7bn assets under management (AUM). This is compared to the start of 2013/14, when the scheme had 80,000 members and £3.8m AUM.

The overall opt out rate for Nest members is 7.4 per cent, with younger people having the lowest rate of opting out. With staging for auto enrolment completed Nest has turned its focus to engaging with its members around their pension savings.

Commenting on the reports, Dean said: “Looking back through past reports makes me realise just how far Nest has grown and developed in a short space of time. What’s more, we’ve managed this growth while delivering a high-quality service to our members.

“As our members become used to saving into a pension, we have deepened our understanding of their needs and how we can work with them to support their retirement plans. This has led to trialling new approaches to engagement, such as personalised video messages to members.

“Our focus is to build upon the success of auto enrolment and ensure we’re helping people achieve the best outcome in retirement.”

The reports are published while Nest is tendering for a new scheme administration service to replace the current contract, which comes to an end in 2023.

Nest corporation chair Otto Thoresen, commented: “We are making good progress with the future procurement of scheme administration services. The aim is to make the scheme ready for a digital world, improving our service and also harnessing advances in technology to further increase efficiency.

“We expect the new service to deliver improved outcomes for our customers whilst maintaining our low-cost ethos and ensuring a service that is robust and secure.

“Just as I have been able to reflect positively on Nest’s achievements this year, I am confident that our current skills, corporate structure and future plans will enable us to continue to deliver for our members in the years ahead.”

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