National Employment Savings Trust, London, hired Legal & General Investment Management to run single-year maturity gilt allocations, said a spokeswoman for the retirement fund.
The gilt funds will be used in the foundation phase, which is for younger members, and in the consolidation phase, which is the derisking part of the plan for members nearing retirement.
They will be added to existing default strategy allocations for the more than £400 million ($597.7 million) defined contribution plan. Upon maturity, they will be replaced on a rolling basis, a NEST statement said. LGIM will provide a rolling replacement of the fund that matures each year so there will always be 10 funds available. A 2016 maturing gilt fund will be replaced by a 2026 gilt fund, for example.
The new single-year gilt funds will be funded by a “slight redirection of current assets,” the spokeswoman said, which will predominantly be from cash in the consolidation phase of the plan. New contributions will also be allocated as appropriate to these funds, she said.
“The aim is to provide improved returns relative to cash for members both as they build up their pot and at the stage when they’re preparing to take their money out,” said Mark Fawcett, NEST chief investment officer, in the statement.
The hire follows a search launched by NEST in December.