ATP-backed Now Pensions takes on UK's NEST with low charges [amended]
UK - Now Pension, the ATP-backed multi-employer trust, today revealed it would charge members an annual management charge (AMC) of 0.3% - matching the fee levied by the National Employment Savings Trust (NEST).
The scheme, which will see its investments run by ATP's investment team in Denmark, also revealed that members would pay £1.50 (€1.75) a month in administration fees - likely to undercut the 1.8% charge on contributions for members paying into the government-backed defined contribution scheme.
Unlike other UK DC schemes, Now Pensions will offer one default investment approach.
Mats Gosvig, ATP's chief risk officer, told attendees: "The intention is to reuse the same strategies and processes we have in ATP in order to make this product work."
This strategy will see investments spread across a diversified portfolio based on five risk classes.
Nilsson confirmed that the product will be denominated in sterling, while being managed from ATP's headquarters in Denmark.
He also said Now's investment approach will include a 'glidepath' approach, with a so-called retirement protection fund becoming optional closer to retirement, as well as a cash protection fund.
The provider said risk would be capped at a pre-agreed limit, with members shifting from the diversified option into the retirement protection fund by default as they approach their target date - with the option targeting returns based on annuity prices.
He said that, while there was not the possibility for members to change their investment option to garner higher returns, they would be able to alter their point on the glidepath by altering their retirement target date.
Asked about the absence of a socially responsible investment option, currently offered by NEST, Nilsson said standards of social responsibility were "very high", but that Now's main focus would be delivering high returns to members.
He also addressed the absence of a religious-compliant fund option, saying: "We see one problem - we have not seen a well-balanced Sharia fund yet."
Lars Rohde, chief executive of the ATP Group, meanwhile explained the scheme's absence of investment options by highlighting their lack of use when offered in Denmark in a state sponsored supplementary DC scheme.
He said that, out of approximately 3m employees in said fund, only a few thousand had exercised choice.
Nilsson, also ATP's head of international business, said auto-enrolment would be a wake-up call for the UK industry.
He stressed that ATP's long history in providing retirement income, citing a 10-year average return of 7.4% by the Danish parent.
He added: "There are three major determinants of the pension benefits: costs, returns on investment and the price of the annuity at retirement.
"Core to our belief is keeping it simple and transparent for members, which will also reduce the need for advice and give better outcomes - and keep costs down."
Addressing Now Pension's lack of fund options relative to its competitors, Nilsson said: "Our experience and research shows that, for most members, choice is a burden.
"And the fact is, where there is choice, 95% end up in the default fund - so why not simply give people a full service and relieve them of this burden?"