How to explain NEST charges to clients

Even with auto-enrolment little more than a year away, NEST continues to have to bust myths about what it is. This is understandable, but for advisers one subject that needs particular attention is how NEST charges its members. NEST charges 0.3% annually on members' total funds under management, plus a charge on contributions of 1.8% as contributions are made. Over a saving lifetime, NEST charges work out as broadly equivalent to 0.5% annual management charge (AMC). So how does 1.8 plus 0.3 equal 0.5%? To keep things simple, let us assume someone is contributing around £1,000 to...