UK - Towers Watson has warned that large UK companies are likely to shun the National Employment Savings Trust (NEST) in favour of their own pension funds, as they will offer better value over the new defined contribution scheme.
Speaking after NEST announced its fee structure - which will see a 1.8% contribution charge levied at savers to pay off the initial government loan, in addition to an annual management charge of 0.3% - senior consultant Paul Macro said: "This approach to charges remains hard to reconcile with NEST's understandable fears that early investment losses risk putting people off pension savings for life."
Macro said the initially muted 2% contribution charge was always meant to be around 2%, meaning the slight reduction came as no great surprise.
On the question of how long the charge will stay in place, he said: "The last government thought it could be until 2030, but that depends on how many people join and how much they save. Will this slight reduction in charges lead to a lengthier payback period?
He added: "Levying charges on contributions as well as the fund value means the loan from the taxpayer will be repaid more quickly than if the approach taken by almost all other DC schemes is taken. This means less interest will be charged to savers in the long run, keeping charges lower."
A spokeswoman for NEST clarified that the two charges would not be kept in separate accounts.
"The effect of including a contribution charge element is to repay the loan more quickly than if a pure AMC were charged. However, if income from the AMC element is higher than expected, the loan can also be repaid more quickly," she added.
Meanwhile, Balfour Beatty has agreed a new eight-year recovery plan with trustees of its defined benefit scheme to close a £375m deficit.
The proposal, which has yet to be submitted to the Pensions Regulator, will see a one-off contribution of £40m, followed by yearly payments of £48m that will increase in line with the consumer price index (CPI), or by as much as 5%.
Additionally, the company will pay 50% of the dividend increase exceeding the CPI hike toward the scheme shortfall.
The new recovery plan will replace one previously agreed in 2008 that aimed to erase the deficit by 2013.
Finally, Daily Mail and General Trust (DMGT), publisher of British tabloid Daily Mail and its sister publication Mail on Sunday, has seen its pension deficit fall by almost £160m in the first nine months of the year.
Reporting its preliminary results for the financial year ending 3 October, the company said the deficit in its defined benefit schemes had dropped from £430m at the beginning of the year to £271m by the beginning of October.
In its report, the company said: "This improvement is due to an increase in the market value of the schemes' assets, coupled with a reduction in the value of liabilities arising from changes in the schemes' membership, and despite a further fall in the corporate bond yield used to discount those liabilities."
DGMT added that negotiations regarding a funding proposal based on its most recent triennial valuation in March were underway and that it expected to reach an agreement with trustees ahead of the June 2011 deadline.