The low charges set by the National Employment Savings Trust (NEST) will set a benchmark with which pension providers will have to compete, Legal & General (L&G) said.
NEST's charges are set at 1.8% for the initial charge on entering the scheme, and a 0.3% annual management charge (AMC).
Tony Filbin, director of workplace savings at L&G, said: "NEST creates a charge benchmark, so private corporate providers will bring their charges down."
Charges on pension funds have been a particular focus of the public since October last year, when a BBC Panorama investigation claimed 80% of contributions are eaten up by management fees.
However, Filbin said auto-enrolment, due to start in October 2012, will not drag pensions business away from private providers.
"Employers who already have provision for their staff do not want to deal with two pension providers or points of entry," he said.
He said some employers with no existing arrangements will be drawn to NEST, but added it is not suitable for all employers, and stressed the role of IFAs in finding the best solution.
"Lots of smaller employers with no existing arrangements will choose NEST instead of, say, a stakeholder, but it is still possible for IFAs to come up with a robust alternative," Filbin said.
In May, senior adviser at Hermes Pension Management David Pitt-Watson said NEST's annual contribution cap of £4,200 would push many employers to choose a private sector alternative when faced with auto-enrolment.
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