He's
the man taking charge of 8m pensions. Like it or not, from 2012
employers will start automatically enrolling workers into a
government-run private pension scheme, even if it is only a tiny company
– such as a hairdressers or garage – with just one or two other
employees. And Tim Jones will be looking after the money.
Jones, 54, is chief executive of Nest, the National Employment Savings Trust, which will become the low-cost default option for employers who have no pension scheme.
This week it announced that charges will be 0.3% a year, making it one of the cheapest funds in the UK. It's estimated that between 4 and 8 million people will join Nest, which could grow into one of the world's largest pension schemes.
Jones is no stranger to running vast operations involving millions of customers and lots of small payments. For 17 years he worked at NatWest, and became the chief of its retail operations, including all the high street branches and more than 33,000 staff. But such is his belief in the need for low earners to obtain better pensions, he took a steep pay cut to join Nest, where he gets £230,000 a year.
His background is unusual for a financial grandee. In 1980 he was trying to break into the music industry as a singer and rhythm guitarist. Maybe some of today's investors in pensions, after Equitable Life, will find that the tracks on his demo tape chime with their experience: Never Again was one of his earliest songs, and Victim of Circumstance another.
In 1981 he joined Brighton band The Deckchairs. "It was a sort of Squeeze/ Q-Tips English soulful rock. We were very self-consciously ordinary. We were not remotely trendy. But this was the early 80s, and perhaps we should have been suicidal nihilists if we wanted to succeed." One of his tracks, Do The Shopping, was played on Radio 1, and he was told Simon Bates was a fan.
But The Deckchairs folded, and by 1982, Jones was looking for a "proper" job. That turned out to be at NatWest, where he rapidly moved up the corporate ladder.
"In terms of dimension, Nest is much like NatWest's retail bank. I love transactions, and this is all about transactions."
His experience at NatWest, and other groups running huge volumes of small, regular payments, tells him that you will never quite know how the public will behave until the product is in their hands. So, although auto- enrolment does not officially begin until 2012, he is hoping to sign up employers long before that.
"You never know what works until it's in the hands of live customers. My philosophy is crawl, walk, run. I'm the hired gun to engineer a solution. And I think we can deliver a great product."
But when Guardian Money first wrote about the launch of Nest and auto-enrolment, the response from readers was bewilderment and, in some cases, anger.
"Oh yeah! Those really reliable pension companies that deliver so much interest on your compulsory savings. Look what happened to endowment mortgages, equity plans and then pension plans and now savings that don't accrue any interest … " said one.
All the statements below come from readers. We asked Jones to give us some answers.
• The amount of contributions is pitiful. The contribution rate needs to be in the region of 15% to 20% in order to fund a decent pension.
"This is a journey. You have to start somewhere. One bunch of people will say it's not enough, others will say it's too much of a burden on small business. A rate of 8% seems to be the consensus point. We are staging this so it's a ramp up, not a cliff edge."
• I thought we already paid into a compulsory pension scheme. This is called national insurance. So now we have to pay twice – once into the national insurance scheme, and again into the so-called "Nest".
"National insurance is about what the state does for you. This should be seen as what you are doing privately on top of that. Nest is in the private sphere."
• The trouble with private pensions is the fund managers follow the same lunacy that created the banking crisis and, indeed, invest the pensions in those lunatic banks. Private pensions will be used to inflate some other bubble. Forcing private pensions will effectively be the same as throwing most of it down the drain.
"We have done a lot of consultation on the investment strategy, and our target market is telling us that they are lower than average risk. We won't be promising that the pension fund won't make losses, but we can mitigate losses. The core investment choice is for the trustees, but the range of investments is likely to be very traditional."
• Wage costs are half of expenditure (in my company it is actually more), so you are going to lose 1.5% from your profit margin by paying 3% [which is the minimum company contribution per worker from 2017] into Nest – not to mention your staff will be hollering for a pay increase in order to compensate them for the compulsory savings. These days many companies don't have 1.5% profit margin to spare.
"We have taken very seriously the desire to minimise the burden on employers. We have designed it to meet the needs of very small employers, even those with just one or two employees. The delivery is very consumer-oriented and we are taking costs very seriously."
•
There is no guarantee that it won't be counted in benefit means-testing – so you will be forced to pay in over all your working life, and then watch it all get clawed back.
"What we don't want is people planning for failure. I'm a big fan of safety nets, but people should also plan for their lives and work out what they can save. Nest will give people the opportunity to build assets and have some measure of control over their lives."
• Can I transfer my existing pension over to Nest if the fees are so cheap?
"No. The current political consensus is that transfers-in will not be allowed, although this may be reviewed. People who have saved through Nest will be able to transfer out after the age of 55. But they won't be able to consolidate other pensions they may have into Nest."
Jones, 54, is chief executive of Nest, the National Employment Savings Trust, which will become the low-cost default option for employers who have no pension scheme.
This week it announced that charges will be 0.3% a year, making it one of the cheapest funds in the UK. It's estimated that between 4 and 8 million people will join Nest, which could grow into one of the world's largest pension schemes.
Jones is no stranger to running vast operations involving millions of customers and lots of small payments. For 17 years he worked at NatWest, and became the chief of its retail operations, including all the high street branches and more than 33,000 staff. But such is his belief in the need for low earners to obtain better pensions, he took a steep pay cut to join Nest, where he gets £230,000 a year.
His background is unusual for a financial grandee. In 1980 he was trying to break into the music industry as a singer and rhythm guitarist. Maybe some of today's investors in pensions, after Equitable Life, will find that the tracks on his demo tape chime with their experience: Never Again was one of his earliest songs, and Victim of Circumstance another.
In 1981 he joined Brighton band The Deckchairs. "It was a sort of Squeeze/ Q-Tips English soulful rock. We were very self-consciously ordinary. We were not remotely trendy. But this was the early 80s, and perhaps we should have been suicidal nihilists if we wanted to succeed." One of his tracks, Do The Shopping, was played on Radio 1, and he was told Simon Bates was a fan.
But The Deckchairs folded, and by 1982, Jones was looking for a "proper" job. That turned out to be at NatWest, where he rapidly moved up the corporate ladder.
"In terms of dimension, Nest is much like NatWest's retail bank. I love transactions, and this is all about transactions."
His experience at NatWest, and other groups running huge volumes of small, regular payments, tells him that you will never quite know how the public will behave until the product is in their hands. So, although auto- enrolment does not officially begin until 2012, he is hoping to sign up employers long before that.
"You never know what works until it's in the hands of live customers. My philosophy is crawl, walk, run. I'm the hired gun to engineer a solution. And I think we can deliver a great product."
But when Guardian Money first wrote about the launch of Nest and auto-enrolment, the response from readers was bewilderment and, in some cases, anger.
"Oh yeah! Those really reliable pension companies that deliver so much interest on your compulsory savings. Look what happened to endowment mortgages, equity plans and then pension plans and now savings that don't accrue any interest … " said one.
All the statements below come from readers. We asked Jones to give us some answers.
• The amount of contributions is pitiful. The contribution rate needs to be in the region of 15% to 20% in order to fund a decent pension.
"This is a journey. You have to start somewhere. One bunch of people will say it's not enough, others will say it's too much of a burden on small business. A rate of 8% seems to be the consensus point. We are staging this so it's a ramp up, not a cliff edge."
• I thought we already paid into a compulsory pension scheme. This is called national insurance. So now we have to pay twice – once into the national insurance scheme, and again into the so-called "Nest".
"National insurance is about what the state does for you. This should be seen as what you are doing privately on top of that. Nest is in the private sphere."
• The trouble with private pensions is the fund managers follow the same lunacy that created the banking crisis and, indeed, invest the pensions in those lunatic banks. Private pensions will be used to inflate some other bubble. Forcing private pensions will effectively be the same as throwing most of it down the drain.
"We have done a lot of consultation on the investment strategy, and our target market is telling us that they are lower than average risk. We won't be promising that the pension fund won't make losses, but we can mitigate losses. The core investment choice is for the trustees, but the range of investments is likely to be very traditional."
• Wage costs are half of expenditure (in my company it is actually more), so you are going to lose 1.5% from your profit margin by paying 3% [which is the minimum company contribution per worker from 2017] into Nest – not to mention your staff will be hollering for a pay increase in order to compensate them for the compulsory savings. These days many companies don't have 1.5% profit margin to spare.
"We have taken very seriously the desire to minimise the burden on employers. We have designed it to meet the needs of very small employers, even those with just one or two employees. The delivery is very consumer-oriented and we are taking costs very seriously."
•
There is no guarantee that it won't be counted in benefit means-testing – so you will be forced to pay in over all your working life, and then watch it all get clawed back.
"What we don't want is people planning for failure. I'm a big fan of safety nets, but people should also plan for their lives and work out what they can save. Nest will give people the opportunity to build assets and have some measure of control over their lives."
• Can I transfer my existing pension over to Nest if the fees are so cheap?
"No. The current political consensus is that transfers-in will not be allowed, although this may be reviewed. People who have saved through Nest will be able to transfer out after the age of 55. But they won't be able to consolidate other pensions they may have into Nest."
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