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