Extra contribution to NEST, workplace pension or S&S ISA?

Zorz2

I'm in my mid-30s and due to job changes in the past, I have >1 pension pots. I anticipate to change employer sometime early next year, after that I'll reexamine my pension with a view to possibly consolidate .

In the meantime, I will receive this month a bonus from work and want to save a chunk of it as an additional contribution to my pension. The question is, which pot would be the best choice from:
* Aviva (the pension plan of my current employer, and where I have most of my pension savings)
* Nest (smaller pot)
* or a Stocks & Shares LISA that I plan to open before the end of tax year anyway (most likely with AJ Bell)

This is a one-off extra payment, that my employer will not match. I'm a basic rate taxpayer. Based on that, it doesn't make a difference where it goes. I'm aware that LISAs are treated differently than pensions when it comes to claiming benefits or bankruptcy, and don't anticipate will matter to me.

Nest has a contribution fee of 1.8% but lower AMC (0.3%) than Aviva (0.78% for AMC+fund charges). I've calculated that -given the same rate of return- the break even point is around 3.5 years, after that it works out cheaper for Nest.

In my Nest pot, I've selected the Higher Risk fund almost immediately after enrolment ( the Sharia fund has even better returns, but found it too volatile and not diversified enough geographically and in sectors for my liking). I've kept the Aviva pot in their default growth strategy fund. In the past 3yr it has performed very similarly to Nest Higher Risk (over 5yr the Higher Risk is actually better), and also broadly similarly to Vanguard Lifestrategy 80 (which is probably #1 in my shopping list for a future LISA).

Obviously past performance isn't guarantee and individual situations can change, but based on the available information and my current circumstances, Nest's limited funds choice doesn't seem much of a problem for me. Having lower long terms costs than either Aviva or VLS80 in a youinvest LISA (0.25%+0.22%+ £1.50 per deal, from what I can gather) is nice too. I'm not considering a VLS80 from Vanguard directly as they don't do LISAs at the moment, btw.

Any comments on my reasoning?

cfw1994

Are you considering buying your first house?

The LISA can help with that, and with the extra government 25%, is a good shout anyway - but clearly you can only access it *either* when you buy a house *or* when you reach 60.

If not, either that or the Aviva pot would be my choice.
I do like to have a few 'baskets' of investments, so I would probably LISA it in your shoes, but anything you read here are just suggestions, of course!

My personal view with a 20+ year horizon is to go all-in higher risk - VLS 100 or similar, & that is what I have suggested to my 'kids' - they have VLS100 ISAs as well as high risk AJBell LISAs which have done pretty well over the past 15 months (VLS up almost 13% in the past 12 months)

....BUT I appreciate markets are perhaps overdue a 'correction', and dropping a big lump only to see it drop 20% in 3 months might be dispiriting.....I am also a fan of averaging these things - eg, if you have 3k, pop £1k in a month for 3 months. or £250pcm for a year...just beware of charges impacting that.

Technically you are over 60% more likely to be better off just lobbing it all in, but the choice is yours!

Zorz2

cfw1994 wrote: »

Are you considering buying your first house?

The LISA can help with that, and with the extra government 25%, is a good shout anyway - but clearly you can only access it *either* when you buy a house *or* when you reach 60.

In that case a LISA would have been the clearly better choice (though I'd be wary in this case to go all in S&S given the short timeframe for investment, perhaps one would pick something more bond-heavy in this case?), but the LISA will be used only for retirement. Thanks for the suggestion anyway.

If not, either that or the Aviva pot would be my choice.
I do like to have a few 'baskets' of investments, so I would probably LISA it in your shoes, but anything you read here are just suggestions, of course!

My personal view with a 20+ year horizon is to go all-in higher risk - VLS 100 or similar, & that is what I have suggested to my 'kids' - they have VLS100 ISAs as well as high risk AJBell LISAs which have done pretty well over the past 15 months (VLS up almost 13% in the past 12 months)

....BUT I appreciate markets are perhaps overdue a 'correction', and dropping a big lump only to see it drop 20% in 3 months might be dispiriting.....I am also a fan of averaging these things - eg, if you have 3k, pop £1k in a month for 3 months. or £250pcm for a year...just beware of charges impacting that.

Technically you are over 60% more likely to be better off just lobbing it all in, but the choice is yours!

I agree with the pound cost averaging, and you're spot on about the charges too. Sadly I don't have a windfall to deposit all at once, but instead will drip feed periodically. I'd probably add money every 2 months or quarterly for the same reason.

Having thought about it a bit more, I decided to just open the LISA with the minimum of £500, and then probably research Aviva's list for a low cost tracker.

ermine

The LISA has the advantage of flexibility plus a government bung over the pension options. I'd be loath to give that up for the pension, which is embargoed for nearly a quarter of a century. At your age flexibility matters - you get a gov bung for house purchase, which is hopefully sooner than 25 years but if some other need comes you can get hold of it.

You would invest differently for a house purchase then a pension, because your house time horizon is probably < 10years as opposed to 30 (in the case of a pension LISA)

Zorz2 wrote: »

( the Sharia fund has even better returns, but found it too volatile and not diversified enough geographically and in sectors for my liking). I've kept the Aviva pot in their default growth strategy fund. In the past 3yr it has performed very similarly to Nest Higher Risk (over 5yr the Higher Risk is actually better), and also broadly similarly to Vanguard Lifestrategy 80 (which is probably #1 in my shopping list for a future LISA).

Three years is too short for comparisons. There are probably good reasons why the sharia fund is more volatile. If you don't have the religious reasons it would be an odd choice as the investment universe is restricted and costs are probably higher.

First establish your goals. How important is the house purchase bung to you? How important is flexibility to get the money before 25 years to you? Are you saving for a house or investing for a pension? Over what timescales?

Then choose the platform and invest accordingly