Nest is expected to break even in 2024 and repay its government loan by 2038, after its latest forecast revealed that, as of March 2021, its loan liability with the Department for Work and Pensions (DWP) increased to £884m, compared to £778m in March 2020.

Nest confirmed that it was "well placed to repay the loan facility", with the net expenditure to be funded from the government loan facility until repaid from the protected surpluses in future years.

More broadly, the annual reports confirmed that the scheme had reached income growth aligned to its three-year business plan in 2021, as well as its operational targets and focus on cost control.

It also showed that both the costs and associated funding for the financial year have been below the annual projections and the funding limit agreed with the DWP.

According to the report, scheme income, which is made up of members’ contribution and annual management charges, increased from £107.3m in 2019/20 to £127.8m this year, representing an income growth of 19 per cent.

Nest attributed the growth to an increase in total net assets, from £9.9bn in 2019/20 to £17.6bn, with analysis from the scheme suggesting that the scheme income resilience was also helped by government programmes, such as the Coronavirus Job Retention Scheme (CJRS).

In addition to financial growth, the scheme saw its membership grow from 9.1 million in March 2020 to 9.9 million in March 2021.

However, Nest also noted that, given the growth in the scheme’s membership and assets under management (AUM), the costs of scheme administration and fund management have increased by around 11 per cent, rising from £95.8m in 2019/20 to £106.6m this year.

The increases from growth of scheme income, according to the annual reports, were therefore offset by increases in scheme administration and fund management costs.

However, looking ahead to 2021/22, the scheme has predicted further increases in scheme income as the scheme’s assets under management grow.

It also predicted that total expenditure will increase, primarily due to increased fund management costs associated with the growth of the scheme’s AUM and the cost of the delivery and implementation of the next scheme administration contract.

Commenting on the scheme results, Nest chief executive officer, Helen Dean, said: “This year, as we mark our 10th anniversary, around one in three working-age people in the UK have a pension pot with Nest. We work for them and it’s our ambition to deliver bigger pensions for members, in a better world.

“Over the next decade, we’ll be introducing more innovation, ensuring our members have easy access to essential information for retirement planning and decision-making, so their pension pot can be as simple to manage as their bank account.”

Nest Corporation chair, Otto Thoresen, added: “The events of the last 18 months have been challenging for many people, including members of the Nest scheme and the employers who have chosen us as their pension provider. Our priority has been to safeguard our high standards of service and investment management during this period.”

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