The National Employment Savings Trust (Nest) took shape over the course of 2011, as the government-established scheme prepared for the large influx of savers expected to accompany auto-enrolment.

One of the most-followed stories on the Pensions Age website in 2011 surrounded the announcement of the scheme’s investment approach in March.

Funds are designed to perform according to members’ life stages, with younger members experiencing lower risk, through investments seeking to match inflation. The majority of members’ working lives will then be spent in a growth phase.

At a briefing in London in March, the trust announced it would target returns of inflation plus three per cent (after all charges) for the ‘growth phase’ of its target date funds.

Nest’s offering is comprised of more than 45 target date funds, in which members will be enrolled according to their expected retirement date. The trust assumes members will seek to retire upon reaching state pension age, though individuals will be able to select alternative dates.

In addition to the target date funds, Nest offers a Shariah fund, an SRI fund, a higher risk fund targeting higher returns, a lower risk/return fund, and a pre-retirement fund for those that join the scheme near their retirement date.

According to chief executive Tim Jones, Nest was working with more than 100 large and small employers at the end of the year, and reporting good feedback. In particular, stakeholders had been impressed with Nest’s ease of use and communications, Jones said.

Designing this communications strategy has been a major focus for the scheme, and Nest has conducted a significant amount of research among consumers to establish their level of financial literacy and the most effective ways in which to communicate with them.

At the Pensions Age spring conference in April, Jones revealed that the decision to use the online channel as the main means of communication was taken prior to the conclusion of market research, and largely motivated by the requirement to keep costs down.

However, market research subsequently revealed employers “overwhelmingly” supported online communications, while the same was true for a “significant majority” of potential members.

In addition, Nest launched its phrasebook in January, after more than a year of research and qualitative testing.

The document outlines a set of terms and phrases replacing conventional pensions jargon, as Nest attempts to speak plain English to its members and the employers using the scheme.

As the organisation rapidly took shape, mandates for the funds were awarded and the composition of the member and employer panels was announced.

F&C Asset Management was awarded the Ethical Fund, HSBC Global Asset Management won the Sharia mandate, while BlackRock, UBS and State Street Global Advisors (SSgA) won the mandates for the “building blocks” of Nest’s target date funds.

Passive global equities will be managed by UBS Global Asset Management, SSgA won the passive UK gilts and passive UK index-linked gilts mandates and the mandate for the sterling cash building block went to BlackRock.

Member and employer panels were convened to provide a forum for employers and members to give their perspectives on the trust’s activities. Panels will act as sounding boards for ideas and suggestions proposed by Nest and will provide recommendations on key issues.

The employer panel is comprised of Jim Bligh, Alison Heywood, Ronke Lawal, Ian Naylor, Francesca Okosi, Phil Orford, Stephen Smith, Karen Thomson, and David Yeandle OBE. It is chaired by Paul Jagger MBE.

The member panel includes Naomi Cooke, Malcolm McLean OBE, Stella Okeahialam MBE, Doug Taylor, and Wendy van den Hende. It is chaired by Museji Takolia CBE.

Looking ahead to 2012, Jones said that the year will see Nest taking on increasing volumes of employers of all sizes across all sectors. The scheme will continue to refine its processes to ensure Nest is easy to use regardless of how employers decide to take advantage of the scheme.

“Of course, it’s a huge year for pensions and while it may not have the immediate feelgood factor of London 2012, automatic enrolment is an Olympian leap forward for the retirement aspirations of millions. We expect automatic enrolment in the round to make its way into consumer consciousness for the first time, and firms and their advisers will also have a greater awareness as they look ahead to the next tranches of staging,” Nest said.

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