Workplace Pension Reform AAT Birmingham Branch Meeting

1. Workplace Pension ReformAAT Birmingham Branch Meeting David Lunt Head of Relationship Management 14th September 2011

2. A new market of people new to saving There are around 19.7 million people employed in the private sector with 14-15 million eligible for automatic enrolment • 9-10 million without a qualifying pension scheme 8 million people within NEST’s intended target market

3. 2012 reforms: what’s changing? Now 2012 - 2016 Employers choose whether to contribute Employers have to offer a contribution to certain jobholders Active choice often needed from worker Do nothing = save in a pension Behavioural barriers to take up Automatic enrolment Uneconomic for existing providers to supply lower earners NEST is designed for our target market Saving is a ‘minority sport’ Saving is the norm

4. Impact on employers (Pensions Act 2008 and 2010 Review) • Minimum Employer Contributions - Employers have to pay in at least part of a minimum contribution with individuals and HMRC contributing the rest • 3% of “band earnings” minimum employer contribution + tax relief + jobholder contribution = total 8 per cent minimum contribution • Total minimum contribution payable from October 2017 • Contributions based on earnings band £5,715 and £38,185 in 2010 terms

5. Minimum contribution levels • The total minimum contribution to a worker’s retirement pot will be 8 per cent of their qualifying earnings • Of this 8 per cent, the employer will have to contribute a minimum of 3 per cent • The rest will be made up of tax relief and the worker’s contribution

6. DWP’s staging and phasing plans 1 per cent worker contribution 3 per cent worker Steady state 5 per cent worker Phasing 1 per cent employer contribution 2 per cent employer Steady state 3 per cent employer Large employers Medium employers Small/micro employers New born PAYEs Staging Apr 2014 Aug 2014 Mar 2016 Oct 2016 Oct 2017 Oct 2012

7. Certification The Government plans to consult on proposed certification options:

8. Who does what? • Scope of automatic enrolment • Staging and phasing timetable • Compliance with employer duties • Regulator of workplace pension schemes, including NEST • A new, trust-based pension scheme • Public service obligation to accept all employers who want to use NEST to meet their employers duties

9. Understanding our target market We are committed to designing our activities around the needs of all of our future employers and members Conducting surveys External research Research panels

10. How NEST can be used

11. Designed for the target market • Always focused on our members Clear communication Travels with the member Online Tailored investment approach Help with retirement income Low charges

12. Key products: Members

13. Investment - key issues Member focused Dynamic management Diversity Responsible investment Choice

14. Proposition to meet all our members’ needs NEST Higher Risk Fund NEST Pre-retirement Fund Your 2022 Retirement Fund Your 2022 Retirement Fund Your 2022 Retirement Fund Your 2022 Retirement Fund Your 2022 Retirement Fund Your 2022 Retirement Fund NEST Ethical Fund NEST Lower Growth Fund NEST Sharia Fund

15. NEST Retirement Date Funds – funds for everyone • A new approach • Age-based investment funds to meet members’ needs Your NEST 2058 Fund Your NEST 2039 Fund Your NEST 2022 Fund

16. Three phases of lifecycle Risk profile Age Maximum Minimum Reference glide path

17. NEST fund structure Your NEST 2058 Fund Your NEST 2039 Fund Your NEST 2020 Fund Annuity Matching Composite Fund Income Seeking Composite Fund Return Seeking Composite Fund Passive Gilts Passive Index Linked Gilts Passive Global Equity Diversified Beta Liquidity

18. Lifecycle of 2058 Retirement Fund 2058 Risk profile Income Seeking Composite Fund Annuity Matching Composite Fund Return Seeking Composite Fund 22 27 32 37 42 47 52 57 62 Age

19. Lifecycle of 2039 Retirement Fund 2039 Risk profile Return Seeking Composite Fund Annuity Matching Composite Fund Income Seeking Composite Fund 40 44 48 52 56 60 64 67 Age

20. Lifecycle of 2022 Retirement Fund 2022 Risk profile Income Seeking Composite Fund Return Seeking Composite Fund Annuity Matching Composite Fund 55 57 60 63 65 Age

21. Getting your money out of NEST NEST scheme and online information Using the Retirement Tool Retirement income (Choose from NEST panel) Shopping around for a retirement income Transfer out at retirement Taking your pot as cash

22. NEST Corporation Chair - Lawrence Churchill Trustee Members Sharon Darcy Tom Boardman Araj Amiri Laurie Edmans Chris Hitchen Julius Pursaill Paul Hewitt Nigel Stanley Sue Slipman

23. Business model NEST Corporation Employers and members Scheme administrator (TCS) Fund administrator (State Street Corporation) Fund managers (UBS, BlackRock, State Street Corporation, HSBC, F&C) Retirement income providers

24. NEST’s features: employers • Designed to minimise your burden: • online • clear communications • no continuing administration when members leave your employment • Designed for your workers: • an investment approach designed for members • low charges • help when buying a retirement income

25. Contact us 0300 3031949 www.nestpensions.org.uk

26. www.nestpensions.org.uk