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Nest: Budget makes auto-enrol investment strategies ‘much more difficult’

Nest chief executive Tim Jones says the Budget pensions shake-up has made it “inherently more difficult” for automatic enrolment providers to decide their investment strategies. 

In last month’s Budget, the Chancellor said anyone can take their entire pensions fund as cash from next April.

In response, Nest said it was reviewing its investment strategy as it is more uncertain how and when people will use their funds.

Speaking at a Reform retirement income conference in London today, Jones said Nest will consult on its new strategy including a series of roadshows with a new plan in place by 2015.

Nest currently invests members’ money in ‘retirement date funds’ based on when they expect to turn their pension pot into a retirement income. As Nest savers approach their target retirement date the fund automatically invests in less risky assets in order to reduce volatility.

Jones said: “[The Budget changes] make it inherently more difficult for any auto-enrolment provider to choose a glide path. The certainty of how pension funds would be treated made it relatively straightforward to devise.

“Now you could design for cash at 55. Or you could say let’s keep them in the Nest growth phase until near state pension age before devolving them into a 6 per cent drawdown and an annuity conversation aged 80. It is soup compared to nuts.

“There are many defensible glide paths you could operate. We take our default structure extremely seriously so we have to think very carefully about where we set our default fund on the broad range of glide paths.”

When asked by Money Marketing, Aviva savings and retirement managing director Clive Bolton refused to say if the insurer was reviewing its strategy.

Hargreaves Lansdown estimates there are £165bn in lifestyle pension funds.

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  1. What’s difficult? Unless your really, really want a rubbish pension – avoid Nest like the plague.

    The really useful role Nest can play is for those who wish to opt out. I just wonder how long Tata (the ultimate proprietor) will be prepared to stick it out.

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