As 2016 draws to a close, alongside the mince pies and festive treats, I’m sure many in our industry will take a measure of pride over the ongoing success of auto-enrolment.
In a year when, in the wider world, the unexpected almost became the norm, the smooth process of bringing tens of thousands of employers into auto-enrolment was a reliable counterpoint.
At Nest, around 200,000 employers have signed up during the course of the last 12 months, which is quite astounding.
Many of these employers signed up with the help of intermediaries or through payroll software; it’s clear that new technology is really pulling its weight as volumes increase.
Making clear comparisons can really help advisers demonstrate that they’re recommending a high quality scheme.While we’ve been getting on with the ‘day job’ of helping employers meet their duties, we’ve also been sharing ideas and approaches with our peers from across the sector – in the UK and globally.
One talking point was when Nest published its first responsible investment report Working for change, which outlines our responsible investing activities and why we believe in the importance of being an active owner of the securities we manage on behalf of our members.
I know responsible investment is one of the ‘signs of quality’ that some advisers keep in mind when making their recommendations around pensions schemes.
For Nest, considering environmental, social and corporate governance risks and opportunities, combined with being an active investor, is part of how we make the most of members’ pots.
We’re clear that integrating ESG risks and opportunities into our investment processes is one of the means we deploy to grow members’ money as companies that are well run, with engaged and active investors, are more likely to be successful in the long term.
We’ll be providing further updates on our evolving approach to being a responsible investor in 2017.
Another publication I think might be important to anyone interested in getting a more comprehensive understanding of fund performance as we go into 2017 is Defaqto’s report, How to analyse auto-enrolment default funds.
I scarcely need to labour the complexities of accurately comparing default funds. To help bring together sector knowledge and provide fairer, impartial comparisons, we commissioned the financial research group to develop more effective measures of performance.
Alongside solid methodology there are some results that might surprise you in terms of how different funds stack up. I think making clear comparisons can really help advisers demonstrate that they’re recommending a high quality scheme.
Though there was some very strong competition, the judges were impressed by our approach to diversification and risk management. We are continuing to increase our range of asset classes, having just launched a search for a global high yield manager.
As 2016 fades into 2017, I think providers and advisers alike can take quiet pride in the way auto enrolment has brought millions of people into pensions saving.
If I had to make a new year’s resolution, it would be to continue to test and share ideas that enable more schemes to deliver high quality approaches, at good value, for these new savers.
Mark Fawcett is chief investment officer for Nest.
