UK - The National Employment Savings Trust has announced its fees structure, levying a 1.8% contribution charge in addition to an annual management charge (AMC) of 0.3%.

The contribution charge, 0.2 percentage points lower than initially expected, will be used to pay off a government loan to cover the start-up costs of the new defined contribution scheme.

Helen Dean, managing director of scheme development, said: "This is great news. It means the members of NEST will have access to a scheme with a charge level approaching the best of those in the pensions' market."

Sam Brand, head of funding and charges, explained that those in the NEST target market are currently only able to access schemes with an AMC of around 1.5% for the first decade they are enrolled, with the rate then dropping by 0.5 percentage points after 10 years.

He pointed out that, according to their modeling, most groups, such as people with a full saving history, workers who join the scheme at a median age of 36 and even short-term savers in their early 20s would benefit from NEST's low-cost structure.

However, Brand did concede that short-term savers over 60 would be no better off than in a comparative stakeholder scheme, with Dean adding that the AMC, while currently set at 0.3%, could be re-assessed by the trustees in future.

Dean would not be drawn on when the contribution charge would be dropped, saying that this again was a decision for the trustees to make.

Brand added that the speed of repayment would depend on how individual companies took to NEST.

"Most of our modeling suggests it will be within 20 years, but it is very hard to be precise about it," he said.

The organisation estimated that someone who enrolled in a stakeholder pension would lose around 13% of its worth to charges over its lifetime, compared with a reduction of 5.8% with funds invested in NEST.

Dean also said she expected the scheme's trustee board to expand in future, saying that guidance recommended nine trustees, while currently only seven had been appointed, in addition to chairman Lawrence Churchill.

Jeannie Drake and Dianne Hayter departed recently, having been created Labour peers, while Paul Hewitt, non-executive director of Co-operative Financial Services and Collins Stewart, have joined.

The previously suggested contribution charge, unveiled by the government earlier this year, had been criticised for being too high.

Churchill said of the announcement: "I'm delighted we're now able to provide certainty on the charge level for NEST - the levels we're announcing today make real the promise of a low-cost scheme for our future members."