Why I’m changing my mind about NEST

Jeremy Cooper is no lightweight, author of the Cooper Review he is one of the key influencers in the Australian superannuation system.

jeremy cooper.jpg

Jeremy Cooper

He comments on Nest’s pivotal role in providing those previously excluded from funded retirement savings with a critical insight which articulates a thought that his been brewing within me over the past few months.

Frustrating as Nest can be (and it can be horribly bureaucratic), it is addressing an imbalance or bias by offering a service that sets out to be self sufficient. Along with  other leading master trusts , it is not dependent on third parties to meet its obligations.

By third parties, I mean financial advisers of various hues. Nest is genuinely distanced  not just from the IFA community but from the actuarial practices who provide high level advice to large employers.

I have often commented on the substantial subsidized Government loan of which  Nest is  a beneficiary


nest debt

the rise and fall of Nest’s debt to the DWP

But I am now coming round to the view expressed by many within the DWP, that this loan is not only necessary to the proper functioning of auto-enrolment but also increasingly good value.

We are learning how to redress historic wrongs in a number of ways. Maybe Nest is achieving for the financially excluded , the kind of positive action we accept in other areas of social injustice,

Nest’s impact

Rather than focus on Nest’s debt, I am now thinking of NEST as an innovator.

and as an ambassador

A stable team

Charlotte Clarke (who has moved this week from the DWP to head regulation at the ABI)explained to me that the success of auto-enrollment in its early years was largely due to the stability of the team working on it.  Clarke herself is key to this stability and it is a sorry week for the DWP that sees  her leave.

But her legacy is auto-enrolment and Nest and her original team embedded both in the DWP and in Canary Wharf (where Nest’s executive now is).

Auto-enrolment has been for the DWP, the department’s success story and Nest is now looking like its golden egg.


Nest’s impact on competition?

I am not concerned that Nest is achieving so much , I am concerned that some of its rivals appear to be treading water. I am thinking specifically of NOW pensions and People’s Pension , both of whom seem to be de-energised at present. NOW is recovering from the sins of its first 8 years and being re-incubated by Cardano. People’s Pension appears to have stalled in its intention to lead the market. It has become inward looking and seems to have lost its appetite to innovate. I worry for it.

While Smart pension moves forward at pace, it is the only private sector workplace pension seriously giving Nest a run for its money as a self-sufficient DC pension.

As for the insurance sector, we are now down to a handful of workplace pensions competing for mandates. Legal &General, Scottish Widows, Aegon , Aviva and Royal London are the last men standing in workplace pensions , the res is legacy.

These insurers are no longer competing against Nest but against the vertically integrated master trusts of Willis Towers Watson, Aon, Mercer and to a lesser extent XPS, Capita and Creative Benefit Consultants.

This part of the market is fed by the weakness of all but a very few single employer occupational DC pensions . When even a scheme as big as Vodafone’s announces it is better inside WTW’s lifesight, it is clear that all single employer trusts are going to have to work hard to avoid consolidation.

I am not worried for this part of the DC market and see Nest raising standards in terms of governance and especially investment strategy.

One cloud on the horizon

The cloud that blights the sunny sky is pot prolifertion. A PPI report, published last week,  confirms what NOW , Peoples and (very quietly) Nest have been telling us for a few years.

There is no silver bullet here, no easy option. In the long term technology will help but just as Nest is forging ahead, so MaPS is struggling so much as a timeline for the delivery of a pensions dashboard.

For Nest , People’s Pension , Smart and NOW  in particular, technology cannot arrive soon enough.  It will be the innovators , not the Luddites who will survive and I’m now thinking of Nest as an innovator. Which is a great relief!



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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