The 2% upfront charge on contributions into NEST is part of an 'outstanding deal,' delegates at the Professional Pensions Show 2010 heard.
NEST chief executive Tim Jones said the charging structure is 'not unfair' and offers an 'outstanding deal' beyond the start-up loan.
He said once members have paid the initial 2% charge, this drops to 30 basis points thereafter. Beyond the repayments of the loan, NEST trustees will decide whether to stick with this charging structure.
He said as the charge guarantees a certain cash flow, the repayment of the loan is quicker, so members will be paying less this way than if there was a straight 50bps annual management charge.
CBI head of pensions and employment Neil Carberry reiterated this is an outstanding deal beyond the loan, but the risk is if NEST does not get the volumes.
The scheme loan would take longer to get repaid, and then members could still end up with this 2% charge.
He said there is also a dichotomy between the delivery challenge and the communication challenge. Although from a delivery perspective the charge makes sense, the key problem is saying to people you put in £100 to save and it becomes £98.
However Standard Life head of pensions policy John Lawson said pensions in the UK are still the lowest in cost in terms of charging structures, compared with other countries. For example, Australia charges around 80bps.
Jones said: "We have a large job to do; we've designed a product for millions who earn up to around £35,000.
"We look forward to engaging with you and showing you what we have built.
Despite improved risk appetite
FOS award limit increase
Relates to 136 million transaction reports
Ceremony will take place 13 November