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Pension Funds

U.K.’s NEST gets additional $423 million in funding guarantees

National Employment Savings Trust Corp., London, received an additional 329 million ($423 million) in funding from the U.K. government, according to a statement by Guy Opperman, the U.K. minister for pensions and financial inclusion.

A NEST spokesman said NEST does not plan to access the 329 million. "It's a guarantee should we wind up as a scheme," he said. The guarantee was provided by the U.K. Department for Work and Pensions following a provision that requires multiemployer plans to obtain permits from the Pensions Regulator to continue to operate in the market.

TPR required a "letter of comfort" from the government to provide a contingent liability, according to the ministerial statement.

Under the 2017 Pension Act, the plan must be financially sustainable and must hold sufficient financial reserves to cover potential closure without putting costs onto plan participants.

"The letter confirms that, in the remote possibility of a triggering-event occurring, government would fund NEST through to closure and meet any one off associated closure costs. This gives a remote contingent liability of 329 million," the statement said.

The expected loss calculated by the department is 16.45 million. NEST has a break-even point estimated for 2027 and is on track to meet that goal, the spokesman said.

"While the news that NEST has got out of holding capital through a government guarantee doesn't come as a surprise, the government needs to give some serious thought about NEST's position in the market — is it a private market participant or is it part of government?" said Darren Philp, head of policy at multiemployer plan Smart Pension, in an email commenting on the announcement.

"It cannot be allowed to unfairly leverage its privileged position, which will only stifle innovation and an effective market," Mr. Philp said. "We've come along way as an industry in recent times, but the time has now come for the government, NEST and the regulator to come clean about NEST's future role."

The 4.1 billion NEST was established by the U.K. government in 2012 to support workplace automatic enrollment program for low-wage earners.