NEST to offer Sharia option

The UK’s National Employment Savings Trust (NEST) is looking for a Sharia-compliant funds manager to manage a global equity fund as it plans to offer more than its default strategy to members.NEST, which has also tendered for a socially responsible investment option, is looking for a global equity fund which is compliant with Sharia law. It plans to select a short list in house, and use advisers to help select the final fund.

It has done extensive research and consultation on what fund choices to offer future members, and while it expects most members to remain in the default fund consistent with other defined contribution funds, a minority may be interested in some fund choice.

While the strategic asset allocation is yet to be set – it was slated for December/January but has not yet been announced– the trustees have said the fund is initially looking to invest in a passive global equity fund, a passive UK gilts fund, a passive UK index-linked fixed interest fund, a low-risk cash management fund and a diversified beta fund which invests in a broad, diversified range of asset classes.

NEST is very focused on creating a fund that is suitable to the particular membership which is the un-serviced low-income workers of the UK, and will position itself as a low-cost proposition – 0.3 per cent a year plus 1.8 per cent on contributions – and the default will be target-date funds.

The fund has also recently completed research into the understanding of pension terms among its target audience. In response it has developed a phrasebook of key terms, phrases and principles to help members better understand pensions.

“Our research suggests that using simple and appropriate terms can reduce barriers to understanding. The way we talk to our members and employers will be critical; many won’t have much, if any, experience of pensions or other complex,” chair of NEST, Lawrence Churchill said.

“We will develop our approach over time, but after 14 months of careful research and development this is a very credible foundation. We hope our work contributes to the drive to reduce jargon in the financial services world more generally.”

It will launch in spring 2011 on a small scale with volunteer employers, to ensure it is ready for the onset of the anticipated higher volumes of employers and members from 2012.