In February 2011 Danish pension fund ATP announced it was considering entering the UK market with an alternative to the National Employment Savings Trust (NEST). Helen Morrissey talks to ATP's Morten Nilsson about the decision
Helen Morrissey: Why are you looking to launch an alternative to NEST?
Morten Nilsson: We see the UK market as very interesting. ATP has 45 years experience of offering low cost pensions and looking at the UK market we feel there is a real need for someone to enter the market offering a low cost pension that really makes sure that members get the most from their savings. This means including investments that can and will perform over the long term.
We are in the final stages of our analysis of the market and it looks positive but as yet no formal launch decision has been made. However, if we do decide to go ahead then we will be able to move quickly and I would expect us to be able to implement our system in six months – we hope to be up and running by the end of the year. (For more on auto-enrolment and NEST click here).
Helen Morrissey: You’ve been reported as saying that the UK approach to lifestyling is too rigid. How does the Danish approach differ?
Morten Nilsson: We left benchmarking quite a while ago and when it came to the financial crisis we were certainly pleased with our decision. Not being locked in by benchmarks gave us the agility we needed to manoeuvre through the crisis. There needs to be more dynamic asset allocation in lifestyling where we focus on getting the right risk exposure for people at the right time – not only “just” by following a lifecycle curve. Also that curve needs to take into account when people actually plan to retire – especially now the default retirement age has been abandoned.
Helen Morrissey: I know a lot of schemes have looked to emulate ATP’s risk approach whereby assets are divided into risk buckets rather than traditional asset classes. Will you utilise this approach in any UK product you develop?
Morten Nilsson: We believe in diversification and do risk allocation instead of asset allocation, which gives a much better balanced portfolio and therefore a better risk adjusted return. We will follow this approach in the UK.
Helen Morrissey: How else do you feel your approach differs from that taken in the UK?
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