Written Evidence to be reported to the House

Part of Pensions Bill – in a Public Bill Committee at 5:00 pm on 15 January 2008.

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Dick Saunders: Having said that, there will be a need for finance in this scheme. We tend to talk about charges as a percentage of funds under management, but a lot of the administration costs are fixed; they are £10 per account or whatever. There is no question but that in the early years, if we have the sort of low charges that we all want to see, the scheme will be  loss-making until those funds build up and the management fees are big enough to cover the cost and the borrowings.

There will be a need for the scheme to borrow in the early years to beat that J-curve, which any business plan has. Obviously, that borrowing should be on arm’s-length terms; I am sure the Treasury will not want to lend to it interest-free.