National Employment Savings Trust (NEST)

Established by the Government with a public service obligation to accept any employer, Nest is by far the biggest scheme in the UK in terms of member numbers, having around 3 million active members and a similar number of inactive members. Its government loan funding, which stood at £539m in April 2017, rankles for some in the industry, but many pension consultants credit it with bringing fresh thinking to the sector, particularly in the field of investment.

The provider enrols members into a series of target-date Retirement Date Funds which invest in a wide range of assets. It uses an environmental, social and governance (ESG) screening process.

The growth phase asset allocation has a 68 per cent exposure to equities, but Nest says its 25 per cent corporate bond exposure is more return-seeking than defensive, and includes emerging market debt and high yield bonds. Its five- year returns in the growth return are just above the Corporate Adviser Pensions Average (CAPA), although with the second-lowest risk rank.

Nest uses nine different fund managers for different components of its offering and has increased the range of asset classes it accesses in recent years. Younger investors are placed in a more cautious ‘foundation phase’ for five years, which Nest says is designed to avoid sharp falls while they develop the pension saving habit.

Members can access a range of alternatives – ethical, Sharia, higher risk, lower growth and pre-retirement.

Asset Allocation charts

Data as of 31.03.18
BenchmarkOverall: outperform CPI after all charges over the long term. Growth phase: CPI+3%
Alternatives offered to defaultEthical, Sharia, Higher Risk, Lower Growth, Pre-Retirement
Charging structure for members1.8% contribution charge 0.3% AMC
Charging structure for employersNone
Total assets as at 31.3.18£2.7bn
Active members in default3 million
% active members in default99%
Transfer out to draw income?No
Does default invest in ESG-screened funds?Already offers it
Scheme administratorTCS
Scheme investment adviserVarious
Asset managers usedUBS, Amundi, SSGA, BlackRock, RLAM, LGIM, HSBC, Northern Trust, JP Morgan Asset Management
1 Year3 Year5 Year
Annualised returns before costs (%)1.535.877.46
Annualised risk3.35.45.4
Sharpe ratio0.361.021.29
CAPA Index +/--0.380.430.22
1 Year3 Year5 Year
Annualised returns before costs (%)1.417.89.08
Annualised risk5.37.46.9
Sharpe ratio0.201.001.26
CAPA Index +/--1.220.710.58