Pension Funds Insider talks to Morten Nilsson, the former head of International Operations for ATP, the Danish pension provider and new CEO-elect for NOW:Pensions. The latter is the new multi employer trust supported by ATP and the first real competitorto NEST - the UK Government-backed national pension scheme.

Why did you choose the UK as the target market for ATP's NOW:Pensions?

There are quite a few factors. The UK is an interesting market for us because of all the reforms. There's auto enrolment, the public sector reforms, but also the retail distribution review which is changing the distribution of pensions. All of this (contributed to our decision).

Then there is the fact that in the UK many people are not saving at all, or not saving enough, and on top of that there has been research which shows that UK retirees get 30%-50 % less out of their savings than we do in Denmark, for example. We feel like we really have something to offer this market.

How do you feel your offering will be different from the rest of the market and NEST?

The lower costs that we intend to offer are an important part of it, but we also have a long standing track record on our investment returns. ATP has been getting good investment results for the last 45 years but especially in the last decade - where we have been outperforming the market quite significantly. I think the approach that we have taken when it comes to investing has been much more diversified than most of the UK funds and much more focused on risk management. We keep agility in all market conditions and have also been able to adjust to the volatility in the market.

Of course, you should not believe anyone who can predict what is going to happen right now with the current conditions but for us this translates into; you have to be very prudent, very cautious and preserve your capital because if you lose money the way down is much quicker than the way up!

'Being safe' for us means 'diversifying'. You can offer growth while lowering your risk and that is our trick. Many portfolios consist of bonds and equities – a lot of equities– and that is a risky portfolio. I don't even want to call that the sunshine model because it works when the conditions are good but not at all when they are not so good.

You say that you will bring more value for money – in terms of fees, what will we be able to expect from NOW:Pensions?

We are not quite ready to announce our fees yet but we will be competitive. There are two things for us that add value and one is to keep the costs low and make sure that the investment approach is able to deliver long term stable returns – they are key elements in our proposition.

Whatcan you reveal aboutyour investment strategy? Will we see more than one option or just a default fund?

We are focussing at the moment on a really good default option. That is our key proposition and is what everyone expecting a decent pension will need.

We are still considering which choices we will need to offer. Our key focus is that you need something which offers you peace of mind; knowing that you can automatically rely on us and don't have to do anything yourself.

We did a lot of research in Denmark, we had a DC scheme with 3.5m members and what we saw was that there were very few people who wanted to do things themselves. When we looked at them we saw they were men in their thirties, with a good income and they took far too much risk. Our research here shows the same, most people are actually not interested, they do not feel equipped to make investment decisions and feel much better if someone else makes the decisions for them.

The point for us is that if you end up in the default you need to be sure it is good but also that someone is safeguarding your best interests, the costs and that the scheme is performing as it should.

Will you have a member or employer advisory commission in place?

We have ideas at the moment to have an employer forum so we can have input from them and have a good close dialogue with them.

Will you have a cap on the amount of savings people can put into the fund?

No, there won't be a cap – we have no limits of that sort. You can put in as much as you wish.

How does NOW:Pensions look at Responsible Investment and ESG issues? And will these principles be incorporated in every product that you will bring to the UK market?

We will be following the Danish approach; we believe that it is important to be a responsible investor. But our approach is that we do it because unethical businesses have a higher risk profile and we do not want to be exposed to that risk, so for us it has sort of a double bottom line.

However, it also means it is not necessarily an 'ethical fund' in terms of that the ethics go before the return. We need to have good returns for our members and in seeking those returns however we have to be living up to responsible standards.

In 2009 there were over 2000 companies who we were engaged with. Some energy suppliers were unethical on the environmental front and our approach was to engage with these companies and try to change the way they do business. We asked other large institutional investors to complain as well. What you saw was that there were actually only a few companies where we felt we had to pull out as they were not listening to us. You can describe us as active investors in that sense.

What would you say to someone if you needed to convincethem to choose NOW: Pensions?

First of all our proposition is a workplace pension, so we are targeting employers and I think what we see is that even though we haven't been established here yet we already have some interest from employers, and also from the public. They call and email us asking about what we are going to provide in the UK. (This is down to) our good reputation in Denmark, but also with the fact that people are looking for something different. People are seeing they paid too much and didn't get enough out of it.

It is also about making is easy for both employers and employees; you don't have to make a lot of choices that you do not feel equipped to make.

Whatupcoming challenges and opportunities do you face in the years ahead?

That is simple; we need to get some customers! That is key for us, we need to get things up and running, get our brand widely recognised and get as many employers as possible to sign up. They can start using our services from the 1 January, which is our first priority. We are hoping to become a significant player on the market and auto-enrolment (is a driver) that has huge possibilities.

First published 14.09.2011

azeevalkink@wilmington.co.uk