The chief investment officer at the National Employment Savings Trust, London, has thrown down the gauntlet to providers of defined contribution strategies to innovate for a new DC market in the U.K., when participants will no longer be required to purchase an annuity — but to keep the participant front of mind.
“Our challenge to you is to innovate,” said Mark Fawcett, addressing delegates at the launch of a consultation paper on the future of retirement and investing for participants of the £260 million ($410.4 million) NEST. “But please remember the member. Too often in financial services we look in the mirror and design stuff that is good for us, but forget about the member.”
NEST officials are looking at the way it designs its strategy in advance of sweeping budget changes that could lead to participants cashing in their DC savings rather than purchasing an annuity, starting in April.
“The concept of retirement is changing,” said Paul Todd, assistant director of investments at NEST, speaking at the same event. “DC is going to have to work a lot harder than it has in the past. That may have some fundamental implications for DC design.”
One of the ideas floated by Mr. Fawcett at the launch event as a potential solution would be for a revival of the deferred annuity market, or a type of longevity insurance, which has participants buy protection by paying a small premium every year.
“That product doesn't exist: Deferred annuities hardly exist here. So that is an area for innovation,” Mr. Fawcett said.
Comments are due Jan. 30, and the consultation paper is available at www.pionline.com/NESTpaper.
