DWP slashes Nest Corp set-up loans

The state-sponsored defined contribution (DC) product, due to begin rolling out in 2012, is funded by a series of government loans, to be repaid by profits from the scheme.

Nest Corporation was due to receive £20m between the start of this financial year (April 1) and its official launch on June 5, but the DWP has admitted it only handed over £8m.

However, the DWP said there is no longer a “need” for the extra £12m as Nest Corporation has cut or deferred payments to various service providers it is using to prepare the scheme for launch.

The news follows recurrent questions over the project’s future, with the new government appointing a committee to review its cost-effectiveness, and appointing known Nest sceptic Steve Webb as pensions minister.

The government has already toyed with a variety of ideas to scale back the 2012 reforms, including scrapping Nest and limiting auto-enrolment to firms with existing DC arrangements (PW 14/06/10).

And in May, PW revealed the DWP was holding high level discussions with the architects of the Thrift Savings Plan – a lower cost alternative to Nest used in the US public sector.

DWP accounts for 2009-2010 showed Nest had received £41m in loans by April 1 this year, while government ministers have previously admitted in parliament a further £20m was due before June 5, when Nest Corporation replaced the Personal Accounts Delivery Authority (PADA).

A DWP spokesman said: “All loan funding was provided to PADA based on evidence of need.

“The actual amount of the loan that was drawn down by PADA between April 1 and July 5 2010 was £7.8m.”