Workplace Pension Reform AAT Birmingham Branch Meeting

David LuntHead of Relationship Management

14th September 2011

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

A new market of people new to saving

There are around 19.7 million people employed in the private sector with 14-15 million eligible for automatic enrolment

9-10 million without a qualifying

pension scheme

8 million people within NEST’s intended target market

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

2012 reforms: what’s changing?

Saving is a ‘minority sport’

Employers choose whether to contribute

Active choice often needed from worker

Behavioural barriers to take up

Uneconomic for existing providers to supply lower

earners

Saving is the norm

NEST is designed for our target market

Automatic enrolment

Do nothing = save in a pension

Employers have to offer a contribution to certain

jobholders

Now 2012 - 2016

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Impact on employers (Pensions Act 2008 and 2010 Review)

• Minimum Employer Contributions - Employers have to pay in at least part of a minimum contribution with individuals and HMRC contributing the rest

• 3% of “band earnings” minimum employer contribution + tax relief + jobholder contribution = total 8 per cent minimum contribution

• Total minimum contribution payable from October 2017

• Contributions based on earnings band £5,715 and £38,185 in 2010 terms

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Minimum contribution levels

• The total minimum contribution to a worker’s retirement pot will be 8 per cent of their qualifying earnings

• Of this 8 per cent, the employer will have to contribute a minimum of 3 per cent

• The rest will be made up of tax relief and the worker’s contribution

4%Worker

3%Employer

1%Tax relief

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

DWP’s staging and phasing plans

Oct 2012

Apr 2014

Aug 2014

Mar 2016

Oct 2016

Oct 2017

1 per cent worker contribution 3 per cent worker

Steady state

5 per cent worker

Large employers

Medium employers

Small/micro employersNew born

PAYEs

1 per cent employer contribution 2 per cent employer

Steady state

3 per cent employer

Staging

Phasing

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Certification

Percentage and type of pay Employer contribution

9 per cent of basic pay at least 4 per cent

8 per cent of pensionable pay, provided pensionable pay is at least 85 per cent of total pay

at least 3 per cent

7 per cent of total pay at least 3 per cent

The Government plans to consult on proposed certification options:

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Who does what?

• Scope of automatic enrolment

• Staging and phasing timetable

• Compliance with employer duties

• Regulator of workplace pension schemes, including NEST

• A new, trust-based pension scheme

• Public service obligation to accept all employers who want to use NEST to meet their employers duties

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Understanding our target market

We are committed to designing our activities around the needs of all of our future employers and members

Conducting surveys

External research

Research panels

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

How NEST can be used

•offered to all workers

Sole scheme

•to sit alongside existing scheme already in place for a different group of workers

For a particular group of workers

•where the existing scheme has a waiting period

Entry level scheme

•Where minimum contributions are made for all workers, using another scheme to ‘top up’ contributions

Base scheme

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Designed for the target market

Clear communicatio

n Online

Travels withthe member

Tailoredinvestment approach

Help with retirement

income Low charges

Always focused on our members

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Key products: Members

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Investment - key issues

Member focused Diversity

Dynamic management

ChoiceResponsible investment

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Your 2022 Retirement

FundYour 2022 Retirement

FundYour 2022 Retirement

FundYour 2022 Retirement

FundYour 2022 Retirement

Fund

Proposition to meet all our members’ needs

Your 2022 Retirement

Fund

NEST Pre-

retirement Fund

NEST Lower Growth Fund

NEST ShariaFund

NEST Ethical Fund

NEST Higher Risk Fund

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

NEST Retirement Date Funds – funds for everyone

• A new approach • Age-based investment funds to meet members’

needsYour NEST 2058 Fund

Your NEST 2039 Fund

Your NEST 2022 Fund

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Three phases of lifecycle

AgeMaximum Minimum

Ris

k pro

file

Reference glide path

22 27 32 37 42 47 52 57 62

Foundation Growth Consolidation

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

NEST fund structure

Return Seeking Composite

Fund

Income Seeking Composite Fund

Your NEST 2058 Fund

Your NEST 2039 Fund

Your NEST 2020 Fund

Annuity Matching

Composite Fund

Passive Global Equity

Diversified Beta

Passive GiltsPassive Index Linked Gilts Liquidity

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Lifecycle of 2058 Retirement Fund

22 27 32 37 42 47 52 57 62

Ris

k p

rofile

Age

Return Seeking Composite

Fund

Income Seeking Composite Fund

Annuity Matching

Composite Fund

2058

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Lifecycle of 2039 Retirement Fund

40 44 48 52 56 60 64 67

Ris

k p

rofile

Return Seeking Composite

Fund

Income Seeking Composite Fund

Annuity Matching

Composite Fund

Age

2039

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Lifecycle of 2022 Retirement Fund

55 57 60 63 65

Ris

k p

rofile

Return Seeking Composite

Fund

Income Seeking Composite Fund

Annuity Matching

Composite Fund

Age

2022

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Getting your money out of NEST

NEST scheme and online information

Retirement income

(Choose from NEST panel)

Shopping around for

a retirement

income

Using the Retirement Tool

Taking your pot as cash

Transfer out at

retirement

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

NEST Corporation

Chair - Lawrence Churchill

Trustee Members

Tom Boardman

Sue Slipman

Paul Hewitt

Chris Hitchen

Julius Pursaill

Laurie Edmans

Nigel Stanley

Araj Amiri

Sharon Darcy

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Business model

NEST Corporation

Employers and

members

Scheme administrator

(TCS)

Fund administrator

(State Street Corporation)

Fund manager

s(UBS,

BlackRock, State Street Corporation, HSBC, F&C)

Retirement income

providers

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

NEST’s features: employers

• Designed to minimise your burden:– online– clear communications– no continuing administration when

members leave your employment

• Designed for your workers:– an investment approach designed

for members– low charges– help when buying a retirement

income

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

Contact us

0300 3031949

www.nestpensions.org.uk

© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.

www.nestpensions.org.uk