Out-Law News 1 min. read
17 Jul 2013, 4:04 pm
NEST chief executive Tim Jones said that the company had taken "rigorous and immediate action" to prevent a repeat of the incident, and that no money had been taken from the scheme itself or from members' pension pots.
Pensions expert Simon Tyler said that the incident "cast a shadow over NEST's internal controls", but said that it was not obvious "what had gone wrong or whether the incident could have been prevented".
"Controls can reduce the risk of fraud, but may not be able to prevent it entirely," he said.
NEST was designed to be a low-cost, trust-based occupational pension scheme for people who were largely new to pension saving as a result of the Government's automatic enrolment programme. It has a public service obligation to ensure that everyone eligible for automatic enrolment can access a low-cost pension and has a particular focus on savers not well served by the existing market. NEST Corporation is the non-departmental public body that acts as the trustee of the scheme.
According to its figures, NEST had 81,255 members (60-page / 1.3MB PDF) at the end of the period under review. This had grown to 275,000 members by the end of June 2013, it said. It now has around £11m in assets under management with investment managers and is working with over 900 employers, of which 480 are in the first stages of automatic enrolment, it said. In addition, seven of its eight principal investment funds performed ahead of their benchmarks since the scheme's launch, it said.
In its annual report, the NEST Corporation said (104-page / 2.8MB PDF) that it was notified in January 2013 that 'mandate' fraud, involving the diversion of a supplier payment, had taken place. As soon as it was made aware of the fraud it "ensured that all relevant regulatory authorities and the police were notified" and began an independent investigation, it said. It also "initiated steps to strengthen controls over the payment process" and carried out additional employee training, it said.
"This was a timely reminder of the need for continuous vigilance in the modern world," said Lawrence Churchill, chair of the NEST Corporation.
Commenting on the scheme's successes over the previous year, he added that it had "got off to a great start".
"There is compelling evidence that NEST's proposition as a straightforward, low charge scheme with a purpose built investment approach, combined with our ability to cope with scale, is resonating well with British companies and their workers," he said.
Public spending watchdog the National Audit Office (NAO) has amended its report on NEST's annual accounts (2-page / 25KB PDF) to reflect the "material loss of public funds" caused by the fraud, while recognising the action taken by the company following the incident.
