Nest to break even in 2024 and eyes loan repayment by 2038

Nest confirmed that the scheme had reached income growth aligned to its three-year business plan during 2021. A focus on cost control led to both costs and associated funding coming in below the annual projections and the funding limit agreed with the Department for Work and Pensions.

The latest forecast by the master trust estimates that it will be able to cover its operating costs from scheme member charges from 2024 onwards, at which point the estimated borrowings will be £1.2bn.

In the master trust’s 2020 annual report, the break-even point was calculated to be in 2026, although this was based on forecasts drawn up before the pandemic.

“Our financial position will be affected by any changes in contribution volumes and ongoing investment volatility that occur as a result of the continuing pandemic,” the report stated.

“However, assessments have been made on the three key areas that impact these long-range financial forecasts. These assessments concluded that we remain in a strong financial position.” 

Nest also said it is “well placed” to repay its loan facility by the end of 2038. The liability with DWP as of March 2021 is £884m, compared with £778m in March 2020.

Pensions Expert reported in July that Nest’s loan from the DWP increased by 66 per cent in 2020-21, as the government-backed master trust saw a rise in members and assets under management.

Scheme income, made up of members’ contribution and annual management charges, rose as planned from £107.3m in 2019-20 to £127.8m this year — a growth of 19 per cent.

Nest stated that the hike was driven by increases in total net assets of the scheme, which grew from £9.9bn in 2019-20 to £17.6bn this year.

The scheme’s membership increased from 9.1m in March 2020 to 9.9m in March 2021, resulting in a rise in scheme administration and fund management costs by 11 per cent, growing from £95.8m in 2019-20 to £106.6m this year.

Commenting on the scheme results, Nest chief executive Helen Dean said: “This year, as we mark our 10th anniversary, around one in three working-age people in the UK have a pension pot with Nest. We work for them and it’s our ambition to deliver bigger pensions for members, in a better world.

“Over the next decade, we’ll be introducing more innovation, ensuring our members have easy access to essential information for retirement planning and decision-making, so their pension pot can be as simple to manage as their bank account.”

Otto Thoresen, Nest Corporation’s chair, added: “The events of the past 18 months have been challenging for many people, including members of the Nest scheme and the employers who have chosen us as their pension provider.

“Our priority has been to safeguard our high standards of service and investment management during this period.”