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NEST anticipates hitting £10bn by end-March 2020

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NEST anticipates that its assets under management will grow to around £10bn (€11bn) over the course of the current financial year, up 75% from £5.7bn as at the end of March, according to its CEO.

The UK auto-enrolment provider has been growing rapidly since it opened for contributions in 2012 and, writing in its latest annual report, chief executive Helen Dean said it expected the pace of change in the past five years to continue in the years ahead.

As at the end of March this year, NEST had 7.9m members – 57% of whom were under 40 years old – 720,000 employers, and £5.7bn of assets under management. The latter figure was more than double last year’s total, when the pension scheme managed £2.7bn in assets.

Five years ago it had 347 participating employers and 80,000 members, and £3.8m of assets under management.

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Dean said: “Looking back through past reports makes me realise just how far NEST has grown and developed in a short space of time.” 

It has been forecast that by the late 2020s one third of the UK working population will have a pension pot with NEST.

Member engagement

The defined contribution scheme said that, with staging for auto-enrolment complete in February last year, it had turned its focus to engaging with members around their pension savings.

“Our focus is to build upon the success of auto-enrolment and ensure we’re helping people achieve the best outcome in retirement,” said Dean.

The opt-out rate stayed at 7.4% over the course of the year following the April 2018 increase in minimum contributions. These went up again in April this year, with the impact of this final part of phasing becoming apparent during the current financial year.

NEST’s in-house research group, NEST Insight, is trialling a ‘sidecar’ savings programme with three employers to explore ways to improve members’ financial outcomes in the long run.

The scheme said its current financial year could also could also see the effects of potential changes in the master trust market as a result of the implementation of the UK’s new authorisation regime and more rigorous standards enforced by the Pensions Regulator.

Almost all of NEST’s members (99%) are enrolled in the scheme’s retirement target date default funds. Its 2040 Retirement Date Fund was representative of the growth phase of its investment approach, NEST said, which was where members’ money was invested for the longest period of time.

Over the past year the 2040 Retirement Date Fund returned 7.8%, net of annual management charges. The three-year average return was 9.8% and the annualised investment return for the fund over the past five years was 9.2%, net of annual management charges.

NEST is currently tendering for a new scheme administration service to replace the current contract, which is due to expire in 2023. It is also assessing bids to run a global investment grade corporate bond mandate.

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