Employers flee Nest in favour of collective DC

Xafinity has been in talks with a UK employer with more than 50,000 employees for a bespoke arrangement based on an existing master trust, while Capita Hartshead has been approached by several companies of the same size that wish to join a collective scheme.

“We’re having ongoing conversations with dozens of employers,” said Ken Anderson, head of defined contribution (DC) solutions at Xafinity, who added they have had initial discussions of the concept with more than a hundred more.

Unlike the National Employment Savings Trust, these master trusts can offer extra features such as tax-free death benefits and tailored communication.

Paul Sturgess, director of DC policy at Capita Hartshead, said there was broad interest from large employers.

“It’s your early auto-enrollers,” he said. “Some of the larger employers are closer to sorting out their auto-enrolment strategy than others, because their closing dates are earlier.”

James Walsh (pictured), senior policy adviser at the National Association of Pension Funds, said the idea had unanimous and increasing support among policymakers.

“They all see the logic of the idea, which is the great benefit of economies of scale keeping cost charges down, enabling you to have the resources and muscle to hire high quality advisers to deliver a high quality product,” he said.

Neil Carberry, head of pensions policy at the Confederation of British Industry, said such arrangements would have to reconcile with a company’s total benefits strategy, and would require a more traditional sector-by-sector model. 

“We don’t necessarily think they have to be trusts,” he added. “This scale could be delivered by a coalition of providers as well.”

A report last week, authored by David Pitt-Watson, suggested private sector pensions could be 50% higher if employers followed the Dutch collective model.