Nest has partnered with Rothesay to co-design a ‘market first’ bulk deferred annuity for defined contribution (DC) pension scheme members.

The insured longevity risk solution for Nest members will form part of its new lifelong retirement income offering.

Once the co-design has been completed, Nest will purchase bulk deferred annuities for cohorts of its members from Rothesay.

The bulk deferred annuity will aim to pool longevity risk and form a key element of Nest’s trustee-managed sustainable income solution.

Nest will look to provide higher incomes for its members by blending an insured solution alongside the predominantly invested elements of a member’s pension portfolio.

The provider will set income levels and investment strategy to ensure sustainability, while the deferred bulk annuity will aim to provide certainty that members will not run out of savings in retirement.

It added that this will be done while allowing flexibility for members to change their minds about how to fund their retirement.

Following completion of the co-design, Rothesay will be able to develop similar insurance solutions for other DC schemes, with Nest stating it believed this would improve outcomes for all DC pension savers in the UK.

“We will deliver a lifelong pension income solution with the ambition to provide a higher average income to Nest’s members, allow flexibility for them to change their minds about how their money is being managed throughout most of their retirement, and provide certainty they will not run out of money,” said Nest chief executive officer, Ian Cornelius.

“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.

“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.”

Rothesay chief financial officer, Graham Butcher, added: “Rothesay will leverage its purpose-built systems, risk management and execution capabilities developed in the defined benefit 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.

“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.”

---