Automatic enrolment – are you ready? Matt Harman Relationship Manager 11th September 2014 Leicester Protect
Legal information © NEST Corporation 2014. All rights reserved. This information doesn’t constitute financial, investment or professional advice and shouldn’t be relied on. We don’t make any personal recommendation or give advice to employers and their workers on how to make investment decisions. If you’re considering using NEST you might want to talk with an appropriately qualified financial adviser. We don’t give any undertaking or make any representation or warranty that this document is complete or error free. We don’t accept responsibility for any loss caused as a result of any error, inaccuracy or incompleteness. Any form of reproduction of all or any part of [these slides] is not allowed. © NEST Corporation 2014
Overview Automatic enrolment and pension reforms What does NEST offer? Supporting employers into NEST
Š NEST Corporation 2014
Reforming workplace pensions Why? What? How?
Š NEST Corporation 2014
Living longer and working less
Number of retired people per 1,000 people of working age
Source: Population estimates and 2008-based principal population projections, Office for National Statistics Š NEST Corporation 2014
Notes: 1. OADR = old age dependency ratio. SPA = State Pension Age. 2. Working age population is defined as individuals aged 16 to SPA. 3. Ratios between 1971 and 2010 are based on mid-year population estimates. From 2011 onwards, ratios use 2010-based mid-year population projections. 4. SPA changes are those contained in the Pensions Acts 1995, 2007 and 2011. For the purposes of this analysis, the changes are applied to the UK population, but it should be noted that pensions in Northern Ireland are a devolved matter and legislation equivalent to the Pensions Act 2011 is still under discussion.
2012 reforms: what’s changed? Before Employers chose whether to contribute Active choice often needed from worker
2012 and beyond Employers have to offer a contribution to certain jobholders Do nothing = save in a pension scheme
Behavioural barriers to take-up
Automatic enrolment
Not economical for existing providers to supply lower earners
NEST is designed for the new majority of pension savers
Saving was a ‘minority sport’
Saving is the norm
© NEST Corporation 2014
Who does what? Scope of automatic enrolment Staging and phasing timetable Compliance with employer duties Sets governance standards for qualifying schemes Regulator of workplace pension schemes and providers, including NEST
A new pension scheme established by statute, run as a trust Public service obligation to accept all employers who want to use NEST to meet their employer duties Š NEST Corporation 2014
Automatic enrolment: On your marks... Which workers you need to automatically enrol?
Who you will need to make contributions for? Š NEST Corporation 2014
Do you know...
If you can use your current scheme to meet your new duties?
When your staging date is?
Developing advisory services Read guidance from The Pensions Regulator (TPR)
Guidance notes available at
tpr.gov.uk
Š NEST Corporation 2014
Staging
Phasing
DWP’s staging and phasing
Employers with 250 or more staff
Oct 2012
Š NEST Corporation 2014
Feb 2014
1 per cent employer contribution
2 per cent employer contribution
3 per cent employer contribution
1 per cent member contribution
3 per cent member contribution
5 per cent member contribution
Apr 2014
Employers with fewer than 30 staff
Employers with 30 to 49 staff
Employers with 50 to 249 staff
Apr 2015
Aug 2015
Oct 2015
Jan 2016
April 2017
Oct 2017
Oct 2018
And just round the corner‌ 140000
120000
We are here
100000
80000
60000
40000
20000
0 41760 41821 41883 41944 42005 42064 42125 42186 42248 42309 42370 42430 42491 42552 42614 42675 42736 42795 42856 42917 42979 43040 43101 43160 41730 41791 41852 41913 41974 42036 42095 42156 42217 42278 42339 42401 42461 42522 42583 42644 42705 42767 42826 42887 42948 43009 43070 43132
Number of private sector employers expected to stage Š NEST Corporation 2014
And just round the corner‌ 140000
120000
We are here
100000
80000
60000
40000
20000
0 41760 41821 41883 41944 42005 42064 42125 42186 42248 42309 42370 42430 42491 42552 42614 42675 42736 42795 42856 42917 42979 43040 43101 43160 41730 41791 41852 41913 41974 42036 42095 42156 42217 42278 42339 42401 42461 42522 42583 42644 42705 42767 42826 42887 42948 43009 43070 43132
Number of private sector employers expected to stage Š NEST Corporation 2014
And just round the corner‌ 140000
120000
We are here
100000
80000
60000
40000
20000
0 41760 41821 41883 41944 42005 42064 42125 42186 42248 42309 42370 42430 42491 42552 42614 42675 42736 42795 42856 42917 42979 43040 43101 43160 41730 41791 41852 41913 41974 42036 42095 42156 42217 42278 42339 42401 42461 42522 42583 42644 42705 42767 42826 42887 42948 43009 43070 43132
Number of private sector employers expected to stage Š NEST Corporation 2014
What does NEST offer?
© NEST Corporation 2014
Designed for the target market Ready for automatic enrolment Clear communication Online Travels with the member Award-winning investment approach Great value Delegated access Š NEST Corporation 2014
How NEST can be used Sole scheme
offered to all workers
As an entry level scheme
where the existing scheme has a waiting period
For a particular group of workers
to sit alongside existing scheme already in place for a different group of workers
As a base scheme
where minimum contributions are made for all workers, using another scheme to ‘top up’ contributions
As your automatic enrolment scheme
letting you keep your existing voluntary scheme while being sure that you’ve got your duties covered
© NEST Corporation 2014
Charging structure
Annual management charge 0.3 per cent
Š NEST Corporation 2014
and
Charge on new contributions 1.8 per cent
Charges – how will NEST compare? Stakeholder scheme
87
13
0.5 per cent AMC
93.4
6.6
NEST level
94.2
5.4
0% Remaining fund Reduction due to charges © NEST Corporation 2014
100%
DWP guidance and strategy design Tailored Clearly Clear objectives labelled risk management funds – designed to protect around members members and deliver best outcomes
NEST 2058 Retirement Fund
NEST 2039 Retirement Fund
Income seeking assets
Growth seeking assets
UBS Global equity
Š NEST Corporation 2014
BlackRock Diversified beta
NEST 2022 Retirement Fund
LGIM
TBA
Direct and listed real estate
Emerging market equities
RLAM UK corporate bonds
BlackRock Sterling cash
SSga Gilts
SSga Index-linked gilts
Our response to Budget 2014 Reviewing elements of our investment approach Different approaches to accessing pension pots – Investment through retirement? – Drawdown? – Staggered vesting? – The future role of annuities? – The role of default funds up to and through retirement?
Consulting with the industry throughout the year – need to get this right in a rapidly evolving market © NEST Corporation 2014
Award-winning investment strategy
Best DC Investment Initiative Award
Š NEST Corporation 2014
Best Use of DC and Hybrid Structures
Best Investment Strategy
Best risk management solutions
Best Newcomer to Real Estate
Restrictions and unique features One price for all
Contribution Contribution cap limit
Transfer ban Transfers
Public service obligation
Š NEST Corporation 2014
Only a pension
Who’s using NEST?
And 1000’s more © NEST Corporation 2014
Supporting employers into NEST
Š NEST Corporation 2014
NEST online – our public website
© NEST Corporation 2014
Communicating NEST
Š NEST Corporation 2014
NEST online – our employer website
© NEST Corporation 2014
Supporting employers into NEST
Employers
Š NEST Corporation 2014
Pension providers Employee benefit consultants Other advisers Software providers Payroll providers Third-party admin
Lessons learned from large employers Managing automatic enrolment via payroll/HR/middleware/ new IT solutions is complex NEST can handle large files of data very efficiently but employer data quality is vital – testing formats is key Employer communication to the workforce is critical Employers use postponement and people opt in Opt out rate currently 8%, lower than expectations – of those 95% opt out electronically Worker enrolment volumes aren’t always predictable to the employer – estimated numbers vs. actual payroll assessment
© NEST Corporation 2014
Supporting employers into NEST
Employers
Š NEST Corporation 2014
Pension providers Employee benefit consultants Other advisers Software providers Payroll providers Third-party admin
How NEST and you fit in Delegated access
Understanding regulations
Š NEST Corporation 2014
Assessment and planning
Scheme selection
Get them up and running
Managing the scheme
Compliance/ monitoring
Key statistics Around 1.5 million members Our opt-out rate is around 8 per cent Working with more than 8,800 employers to help them meet their automatic enrolment duties Currently around ÂŁ200m in assets under management
Š NEST Corporation 2014
What NEST offers We’ve got it covered We’re designed for automatic enrolment NEST Retirement Date Funds are right for most workers Sharia, ethical and different risk funds at the same low charge Straightforward approach for members and clear communications Sophisticated risk management, investment and governance structures International expertise throughout the supply chain Pots that travel with the member when they leave Comprehensive support through our website
© NEST Corporation 2014
What NEST offers We lighten the load Plain language templates for communications to workers Decision trees, tools and explanatory guides Preset contribution levels and enrolment types Electronic opt-out by web or telephone All NEST administration can be delegated to third party or internal specialists
Š NEST Corporation 2014
Contact NEST - advisers If you’re an adviser: Email us at intermediary.enquiries@nestcorporation.org.uk Visit nestpensions.org.uk/NESTforadvisers
Š NEST Corporation 2014
Š NEST Corporation 2014
nestpensions.org.uk