Good value means a clear focus on member outcomes, says NEST

NEST today welcomed the publication of a new report from the Pensions Insitute, VfM: Assessing value for money in defined contribution default funds. It lists six key factors that collectively determine value for money for members of a default DC scheme.

These include:

• a total expense ratio (TER) in the region of 0.5 per cent for the accumulation period
• a well-designed multi-asset default fund with a glide path that is subject to regular modelling scrutiny
• strong independent governance
• effective member communications that focus on improving the member outcome.

The report says that providing value for money for members means delivering the optimal combination of scheme cost and design, sustainable over both the accumulation and decumulation periods.  

How NEST meets the key factors identified

• TER of 0.3 per cent
• a multi-asset default fund range with a dynamically managed glide path,
• our trust based and not-for-profit nature which includes strong independent governance and a clear fiduciary duty to members and
• clear, jargon-free member communications

Mark Fawcett, chief investment officer at NEST, said:

‘With the expected significant growth in the DC pensions market, and as DC becomes the primary source of occupational pension saving in the UK, it is clearly vital that millions of people have access to high quality, good value schemes. These schemes should have the scale to implement innovative risk-managed default investment strategies to deliver consistently good outcomes in line with the best funds highlighted in this report.

‘We also believe clear and realistic investment objectives are important in assessing value. NEST has demonstrated that high quality, carefully managed and well-diversified default funds can be delivered at low cost.’

NEST’s investment approach - key features:

1. Unique default option comprises of 47 single-year target date funds, risk managed for each year of retirement
2. Focused fund range including Ethical, Sharia, Lower Growth and Higher Risk options each yearthe same low charge as the default
3. High quality risk management driven by cutting-edge investment techniques, high quality data and analysis and transparent governance  
4. Cost-efficient delivery - bespoke solutions powered by leading global fund managers
5. Clear investment communications designed with and for members, employers and their advisers.