Admin woes will distract from NEST investment strategy

The 'administrative nightmare' of auto-enrolment into National Employment Savings Trust (NEST) will divert necessary attention from the scheme’s investment strategy, the Pensions Institute warns.

Director professor David Blake says keeping track of contributions for migrant and casual workers will be a major challenge for NEST Corporation and it could face problems managing cash flows.

He says: "Think of the problem of dealing with seasonal farm workers living in tents and moving every few weeks to another job. Think what would happen if there was a slight mistyping of their name or National Insurance number when this happened."

He adds: "Tim Jones will be concerned to ensure that the money collected is properly allocated to each member's account. He will be far less concerned with investment strategy and stock market movements - the biggest problem will be losing track of cash flows."

A number of people previously recommended collecting contributions for NEST through the National Insurance system, however Blake said the government knew it could not cope with this degree of transactional frequency.

He adds: "That's why the government went for a private sector solution."

Blake says PADA also wants the default fund in auto-enrolment to be fairly low risk in the early years, in order to avoid any reputation damage if there are big falls in the value of members' accounts.

A PADA spokesman says: "PADA is very much focused on achieving excellence for both the administration and the investment strategy."