Savings energy: Fiona Smith, GC at Nest

Set up to help with pensions auto-enrolment, Nest has gone from start-up to snaring its millionth member in just 18 months, which suits GC Fiona Smith just fine

Something peculiar has happened to pensions. Thanks to Chancellor George Osborne’s declaration of a ‘pensions revolution’ and the public debate that followed – unlikely as it may seem – it has become a hot topic.

Fiona Smith is at the eye of this pensions storm. As general counsel of the National Employment Savings Trust, known as Nest, she has taken a leading role in bringing pensions to the masses.

The most important thing to know about Nest is it is not your average pension scheme. It was created as part of the Government’s reforms under the Pensions Act 2008, with the primary function of helping employers and self-employed people transition smoothly to auto-enrolment – the new duty to automatically enrol all eligible workers in a workplace pension.

Smith Nest

This policy officially kicked off on 1 October 2012, but is being phased in gradually over five years, starting with the biggest companies and culminating with those that have just one or two members of staff. Eventually, an estimated nine million workers will be signed up to pensions under auto-enrolment.

These numbers are not small fry, which is where Nest comes in. The Government enacted the defined contribution occupational pensions scheme with funding from the Department for Work and Pensions, gifting the organisation a mandate to provide accessible, low-cost pensions. Essentially, it is a safety measure to ensure that no one who should have a pension falls through the net.

And, drip by drip, employers are signing up. Nest welcomed its first members in October 2012 and by April this year was celebrating the sign-up of its one millionth joiner.

Grid pattern

Taking legal charge of the project would be a big job for any general counsel, let alone one with no experience of working in pensions. Fortunately, Smith is able to draw parallels with her decade working as general counsel and secretary of the National Grid from 1996.

“In the 1990s there was a dash for gas, with no rulebook and no legal framework,” Smith says. “We were dealing with regulators and it was a period I really enjoyed.”

She has applied the same start-up mentality to her latest role.

“At Nest, we’re designing and building with no defined rules,” she says. “We’re trying to ensure regulators, politicians, civil servants and our members are all happy.”

That is no easy task, particularly given the increasing influx of members to deal with. The organisation will shift from a start-up to one of the biggest pension funds in the UK in only a handful of years.

Another challenge is keeping within Nest’s tight legal budget. It spends less than £650,000 a year on legal expenses. As a not-for-profit organisation it needs to keep an eye on its spend, which will remain relatively static despite its burgeoning number of scheme members.

“The main challenge is the growth of Nest,” Smith confirms. “That involves ensuring we get our policy objectives delivered and complying with all the rules and regulations. 

“We won’t be successful in those things unless we’re as cost-effective as we can be.”

One way of achieving that is by balancing the work between in-house and external functions. The organisation has about 300 staff, but its general counsel team is home to just 15 including Smith. And of those, only about eight are qualified lawyers. The remainder come from a technical background.

“We needed to pull together a team of good pensions advisers in a cost-effective way,” she explains. “The tech people aren’t secondary to the lawyers. They know the regulatory stuff and it makes sense to knit them into our team. They’re not treated any differently and are a key part of the general counsel team.”

While Nest’s in-house team provides key counsel and advises on legal risks, it turns to external advisers for specialist know-how or when it is inundated with work.

In its first 18 months the organisation has turned to firms including DLA Piper, Eversheds, Field Fisher Waterhouse and Squire Sanders. However, Nest is about to kick-start its inaugural panel review with a tender process later in the year.

Smith is approaching it with an open mind. “As Nest grows its needs evolve,” she says. “We need organisations that can grow with us. We don’t want people who say ‘we’ve always done it that way, so we’ll do it that way again’. We need people who will help us solve problems.”

Having advised a number of law firms on auto-enrolment issues, Smith is keenly aware that some have successfully engaged with the topic while others “don’t understand the first thing about it”.

She is considering a number of traditional law firms, but Smith’s eyes light up when discussing alternative business structures and the changing nature of the legal market.

“There are new people coming into the market in innovative ways,” she notes.

These entrepreneurial legal providers may be well suited to Nest’s unusual business model. After all, Smith has never shied away from doing things differently. And that is one quality the pensions world cannot have too much of in 2014.

Fiona Smith, Nest

Position: General counsel

Reporting to: Tim Jones, CEO

Total employees: 300

Legal team: 13

Main law firms: DLA Piper, Eversheds, Field Fisher Waterhouse, Squire Sanders