Marvin OnumonuNest has partnered with Rothesay to develop parts of its new retirement income solution for defined contribution (DC) pensions.
Rothesay will work with Nest to co-design a bulk deferred annuity for DC pension savers.
After completing the design, Nest will buy bulk deferred annuities for groups of members from Rothesay, pooling longevity risk.
This will form part of Nest’s trustee-managed income plan.
By using an insured product alongside invested member funds, Nest aims to deliver higher incomes than traditional methods.
Income levels and investment strategy will be set by Nest to keep things sustainable.
The deferred annuity will make sure members do not run out of money in retirement.
Members will still have flexibility to change how they fund their retirement.
The shift from defined benefit (DB) to DC pensions means individuals are now responsible for making their savings last.
People face the risk of running out of money or not enjoying a comfortable retirement if they spend too little.
Once the co-design is finished, Rothesay plans to offer similar insurance products to other DC schemes in the UK and globally.
Ian Cornelius, CEO at Nest, said: “We know our members are finding it hard to manage the multiple risks they face in retirement on their own.
“It’s our role to do everything we can to help them achieve great outcomes in retirement.
“The government, in its Pensions Bill, is calling on all pension schemes to offer guided retirement pathways for UK savers.”
Cornelius added: “To deliver this, and support our members, we’re developing a lifelong retirement income solution which will play a vital role for those members who want and expect their pension provider to deliver a pension income for them, not a pot.
“We want to help build financial peace of mind for all UK savers.
“Our solution will aim to provide a lifelong income solution to Nest’s members and provide certainty that they will not run out of money in retirement.”
He said: “Our members will know that Nest is helping them every step of the way as they make the transition from working life to retirement, where they are faced with some of the most complex financial decisions of anyone’s lives.
“This partnership with Rothesay has the potential to be transformational not only for our members, but all DC savers.”
Graham Butcher, chief financial officer at Rothesay, said: “This partnership brings together the UK’s largest specialist pensions insurer with one of the UK’s largest workplace pension providers to create an innovative and sustainable retirement model for nearly 14 million Nest members.
“Rothesay will leverage its purpose-built systems, risk management and execution capabilities developed in the DB pensions market and apply these for the benefit of DC pension scheme members.
“This is an important step forwards in transforming retirement outcomes for DC members and we are delighted to have been selected to partner with Nest in this groundbreaking initiative.”
Butcher added: “It has been a hugely collaborative process so far and we are excited to continue our partnership to secure the long-term future for millions of DC savers in the UK.”
