TISA Decumulation Seminar 24 November 2017 Ray Chinn, Head of Retirement Options NEST Corporation

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1 TISA Decumulation Seminar 24 November 2017 Ray Chinn, Head of Retirement Options NEST Corporation

2 How will NEST deal with retirement for circa three million largely disengaged customers with small pots?

3 Overview It was all going so well Success of auto enrolment Who are NEST members? and then the Chancellor stood up What do NEST members expect? What does NEST offer? What does NEST (and its members) think is important? How can we deliver this? So where does this leave us? Next steps 3

4 It was all going so well

5 Auto enrolment: key statistics Over 7.1m people are saving into a workplace pension through auto enrolment* NEST has over 5.7m members 79% of consumers think that auto enrolment is a good idea** Sources: *DWP Automatic Enrolment Advisory Group Feb 2017 **NEST consumer tracker, April

6 What do workers think of auto enrolment? 79 per cent agree it s a good idea 73 per cent agree that a workplace pension is a good thing for them NEST s opt out rate is currently 8 per cent Sources: NEST consumer tracker survey, May 2016 and DWP workplace pensions indicators - March 2017 survey 6

7 Impact on savers The number of people saving into a workplace pension could increase by around 10 million Source: DWP Automatic enrolment evaluation report published in 2016 The amount saved in workplace pensions aims to increase by around 17 billion a year 7

8 NEST key statistics 506, m+ 18,400+ Employers Members with 2.3bn funds under management NEST Connectors 8

9 NEST s features A pension scheme that responds to members needs: One retirement pot for life Keep track online An investment approach designed for you Low charges Help when buying a retirement income 9

10 Restrictions and unique features Contribution cap Transfer ban NEST One price for all Public service obligation Built specifically for auto enrolment Ability to provide a full range of retirement income solutions X 10

11 and then the Chancellor stood up

12 Freedom & choice a new challenge for NEST This offered more flexibility and wider choices for members It created opportunities for new ways to turn pots into incomes Our challenge is to ensure members can access suitable retirement options

13 What do NEST members expect? When you retire, do you expect NEST to pay you a regular income from your pensions savings when you get to retirement age, or do you expect to use the money in your pension pot to buy something from elsewhere?

14 What does NEST offer? Cash out Small pots UFPLS Partial cash out Partial UFPLS TV / OMO Signposting Pension Wise TPAS Avoiding scams

15 What does NEST think is important? Our key concerns Risk of scams Paying more in charges and / or tax Choosing unsuitable investment strategies Missing out on appropriate governance Frictional trading costs of moving assets Missing out on valuable benefits / investment growth Running out of money / underspending / losing means tested benefits

16 What does NEST think is important? NEST consultation the future of retirement November 2014 NEST retirement income blueprint June 2015 DWP call for evidence July 2016 DWP response to call for evidence March 2017 FCA Retirement Outcomes Review interim report July 2017 Work & Pensions Select Committee Inquiry November 2017

17 What does NEST think is important? Guiding principles 1. Living longer than expected and running out of money is the key risk in retirement and a critical input into retirement income solutions. 2. Savers should expect to spend most or all of their pension pots during their retirement. 3. Income should be stable and sustainable. 4. Managing investment risk is crucial as volatility can be especially harmful in income drawdown-type arrangements. 5. Providers should look to offer flexibility and portability wherever possible. 6. Inflation risk should be managed but not necessarily hedged.

18 How can we deliver this?

19 So where does this leave us?

20 Next Steps NEST market engagement Still concerned about Disconnect between inertia & engagement Scams Wider member detriment Need more innovation in the mass market Advice & guidance Propositional innovation core pathways to protect the AE generation

21 To sum up How will NEST deal with retirement for circa three five million (and growing) largely disengaged customers with small pots? in order to remove the risk of detriment as a result of freedom and choice, the answer lies in well governed guided pathways achieving a minimum standard and a competitive advisory market for those with larger pots and more complex needs. NEST response to WPSC Pensions Freedoms Inquiry, 1 November 2017

22 Legal information. All rights reserved. This information does not constitute financial, investment or professional advice and should not be relied on. We do not make any personal recommendation or give advice to employers and their workers or third parties on how to make investment decisions. If you are considering using NEST you should consider talking to an appropriately qualified professional. We do not give any undertaking or make any representation or warranty that this document is complete or error free. We do not accept responsibility for any loss caused as a result of any error, inaccuracy or incompleteness. Any form of reproduction of all or any part of these slides is not allowed. The NEST trade marks and trade names used above are owned by NEST Corporation and should not be used in any way without our permission. 22