Nest fund administration not a "major challenge"

Joe Antonellis, vice chairman of the investment company, which was awarded the administration contract last week, had been working “for some time” with the government on the fund administration contract.

And he added State Street would not be creating any new systems for the scheme, instead planning to use its processes for providing the same service in the US DC market.

“It will be a pre-designed funding service. We hope it is as large as it can be.” he said. “I don’t think it will be a major challenge.”

The six million figure is the maximum postulated in the recent independent Nest and auto-enrolment report. Antonellis said the company could not predict the size of the funds in Nest. 

State Street hopes to double its non-US revenues over five years, said chief executive officer Jay Hooley, who sees defined contribution (DC) pension schemes as a key growth area.

In particular, target date retirement funds, such as Nest, and risk-based funds were driving “demand for global strategies” in DC investment, Hooley said. 

But Robin Hames, head of technical, marketing and research at Bluefin Group, warned the Nest project entailed an administration risk as well as the reputation risk of it not working.

“What we are looking at is a large government-backed IT product,” he said. “There will undoubtedly be teething problems.”

Nest announced last week it had awarded the ten-year contract to State Street Corporation – which holds £12.8trn in assets under custody and administration worldwide, and has 90 UK pension fund clients – after a “strong competition”. 

The company will provide “end-to-end fund administration and custody services” to Nest, which also sent advertisements for five investment mandates for global equities, UK fixed interest, index-linked gilts, cash and diversified funds.