Pensions: NEST

House of Lords written question – answered on 30th March 2010.

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Photo of Baroness Noakes Baroness Noakes - Shadow Minister, Shadow Minister

To ask Her Majesty's Government how much is expected to be loaned to the National Employment Savings Trust in each of the years 2010-11 to 2014-15; when it is expected that the loans will be repaid; and what rates of interest will be charged.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Parliamentary Under-Secretary (also in the Department for Communities and Local Government), Department for Communities and Local Government, Parliamentary Under-Secretary (also in the Department for Communities and Local Government), Department for Work and Pensions, Parliamentary Under-Secretary (Department for Communities and Local Government) (also in Department for Work and Pensions), Parliamentary Under-Secretary (Department for Work and Pensions) (also in the Department for Communities and Local Government)

My department continues to work with the Personal Accounts Delivery Authority to refine cost estimates for NEST, which will ultimately depend on a number of factors including the size and nature of its membership, and the outcomes of a number of outstanding procurements.

However, based on our current estimates, we envisage that the loans made to the NEST Corporation each year will be of the order of:

2010/11* £90-95m
2011/12 £65-70m
2012/13 £80-90m
2013/14 £85-100m
2014/15 £90-110m

* Amounts for 2010/11 include amounts lent to PADA in 2010/11 prior to NEST Corporation being established

The period in which the loan to NEST Corporation will be repaid will also depend on a variety of factors, including the final costs of NEST and the size and nature of its membership. We anticipate that the total loan period, including the years in which NEST borrows from Government and the subsequent repayments, will last in the region of 20 years.

The terms and conditions of the loan agreement between my department and the NEST Corporation will not be finalised until after the NEST Corporation has been established. We anticipate, however, that the loan will be given at a commercial rate of interest in accordance with government-lending rules and that, in recognition of the extra costs NEST faces in fulfilling its public service obligation to accept all those employers who wish to use the scheme, NEST will be provided with interest relief to reduce the finance costs its members will bear to the Government's own cost of borrowing.

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