Since 31 December 2021, pension schemes of under £100 million are required to undertake value for member (VfM) assessments to ascertain if their current arrangements offer the best value for members. If not, businesses may need to consider whether they consolidate their pension schemes into a larger scheme, such as into an authorised Master Trust like Nest. This authorisation by The Pensions Regulator means we meet rigorous standards when it comes to areas like how we’re run, the processes we follow, and how sustainable the scheme will be well into the future.
Value for member assessments must look at quality of administration and governance and compare costs and charges and net returns against at least 3 other schemes.
How Nest can help
To help advisers and trustees completing VfM assessments we have collated the information you’ll need on Nest below:
Quality of administration
Our current scheme administrator is Tata Consultancy Services (TCS). Part of the Tata Group, it employs over 353,000 IT consultants in 45 countries and has 88 delivery centres in 18 countries.
Its key responsibilities are:
- enrolling members
- collecting contributions
- managing accounts and accessing savings employer participation
- passing funds to our fund administrator, State Street Bank (SSB)
TCS has an excellent track record in pension administration and IT. This is joined by more than 30 years’ experience in the UK insurance sector with 90 insurance clients including seven of the top UK insurers.
TCS administers the Nest scheme from its offices in Peterborough and India, helping to ensure 24/7 customer services and continuity.
We measure TCS’s work for quality and accuracy using an integrated quality management system (IQMS).
TCS conducts continual forecasting and shares capacity plans with us via a customer service governance group. It updates our operations department monthly during business as usual.
Bulk transfers solution
We offer a bulk transfers solution for employers that wish to move from an existing scheme to Nest. We can accept bulk transfers, including transfers without consent, subject to certain conditions being met. Among these conditions is that any bulk transfer must be from a scheme whose employer is a participating employer in Nest and contributing on behalf of at least one jobholder.
Quality of governance
The Nest scheme is run by a Trustee, the Nest Corporation. The Trustee comprises up to 15 Board members and the employees of Nest Corporation.
Nest Corporation is a public corporation that operates at arm’s length from the government (known as an arm’s-length body). We are accountable to Parliament through the Department for Work and Pensions (DWP). At the same time, we are not part of the government, and we have independence around day-to-day management decisions and asset allocations.
Nest is a registered pension scheme for tax purposes under the Finance Act 2004 and was registered with HMRC on 21 January 2011.
Our Board currently has 11 members, including a Chair and 10 other Board members.
Collectively they are responsible for setting the strategic direction and objectives of the Trustee of the Nest scheme. They have a number of legal duties, including making sure that our scheme is run in the interests of our members.
Board members are appointed by the Secretary of State for Work and Pensions in line with public appointments guidance that promotes selection on the basis of merit, fairness and openness.
Every Board member completes The Pension Regulator’s (TPR) Trustee toolkit, an online learning programme. New Board members must complete this within their first six months in addition to a detailed induction programme. We review their knowledge annually and provide ongoing training to help them fulfil their duties.
Our Board members have a broad spectrum of experience and a wealth of pension industry knowledge. Their biographies are available on our website, and in the annual report and accounts for Nest Corporation and the Nest scheme.
Our Financial Conduct Authority-approved investment advisory firm, Nest Invest, selects and monitors top fund managers for each type of investment to ensure our portfolio consistently delivers some of the top reward-to-risk ratios in the industry.
Our default investment strategy, the Nest Retirement Date Funds, is unique in the UK. We have designed the targets for growth and acceptable risk in these funds to match how far members are from their expected retirement date down to the year.
We have leveraged our scale to design a highly diversified portfolio of investments, which helps to dampen the impact of market volatility and means we can access investments for our members that would otherwise be out of reach, such a green infrastructure.
We have made a strong commitment to responsible investing because we believe this will increase the returns our members see on their investments.
We set up a climate-aware developed equities fund with UBS in 2017 as a major part of our portfolio. Based on our research on risks and opportunities, we believe climate-aware investments are better long-term investments for members’ pots and their living standards.
We were among the first pension providers in the UK to commit to aligning our entire portfolio with the Paris Agreement’s goal of limiting global warming to 1.5C by 2050. To do this, we are moving all of our equity holdings into climate-aware funds and we are ending investment in certain fossil fuels, such as thermal coal, oil sands and arctic oil and gas exploration. You can find more details in our climate change policy.
How net returns are reported
Nest provides net returns at the end of each quarter. These can be viewed here.
Costs and charges
We don’t charge employers to use Nest, it’s completely free. Our charging structure for members is the same for all, no matter what they earn.
These charges are made up of two parts:
- a contribution charge of 1.8% on each new contribution
- an annual management charge (AMC) of 0.3% on the total value of the pot
For example, if a member paid £1,000 into their pot over the year, their contribution charge would be £18. If their pot was then worth £10,000, they’d pay an AMC of £30. The total charge would come to £48. That’s just under 0.5% of the total value of their retirement pot.
There are no hidden costs when you save with Nest – these two fees are all members pay. We don’t charge for switching funds, changing retirement date, transferring pots or any other services.
The money you pay covers everything, including:
- the cost of administering members’ pension pots
- management fees for investing your money
- transaction costs.
Effects of costs and charges
To see the combined effect of the annual management charge, contribution charge and transaction costs over the years in our please refer our Costs and charges booklet . This document demonstrates the effect of costs and charges for four different age profiles.