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Nest tenders for single-year gilts to boost default fund

Nest is seeking single-year maturity gilt funds to bolster its default investment strategy for members’ savings.

The Government-backed auto-enrolment pension scheme says it plans to use ten single year maturity gilt funds, to be replaced as they mature, in its Nest Retirement Date Funds.

The funds will be used in the early and final stages of a member’s accumulation phase to keep a lid on the volatility of the value of pension pots while providing a better return than cash.

There are around 50 retirement date funds, with members who either make no active decision or pick the default placed in the fund that corresponds to their expected retirement year.

Funds are made up of ‘building blocks’ – units in pooled funds that normally invest in a single asset class.

Nest chief investment officer Mark Fawcett says: “Nest is committed to continually refining our investment offering to members as we grow. Single year maturity gilt funds will have a role in both the foundation and de-risking phases of our three-staged investment strategy, allowing us to refine how we deliver our risk management approach for members both as they build up their pot and at the stage when they’re preparing to take their money out.

“This procurement comes at an exciting time in the evolution of Nest as we seek to secure better retirement solutions for our members in the changing pensions landscape.”

The tender process will run until 9 January 2015.

Nest members pay an annual management charge of 0.3 per cent and a contribution charge of 1.8 per cent for each new payment into their pot.

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