Nest with NI benefit or direct to SIPP?

BuildTheWall

I am looking to increase pension contributions. But employer uses Nest whose fund choices aren’t great. I need to choose between
(a) increasing employee contributions to Nest and get NI benefit, but invest in poor fund options
(b) contribute directly to my SIPP with HL and choose a good ETF / IT. 
No additional matching employer contributions and no additional costs with HL, except trading cost. 

One major problem with Nest is they don’t allow transfer out unless I quit my employer. So the funds will be locked in for an unknown period. 

Marcon

BuildTheWall said:

I am looking to increase pension contributions. But employer uses Nest whose fund choices aren’t great. I need to choose between
(a) increasing employee contributions to Nest and get NI benefit, but invest in poor fund options
(b) contribute directly to my SIPP with HL and choose a good ETF / IT. 
No additional matching employer contributions and no additional costs with HL, except trading cost. 

One major problem with Nest is they don’t allow transfer out unless I quit my employer. So the funds will be locked in for an unknown period. 

That's not quite right. You can transfer out if you (and your employer) have stopped contributing to your NEST account.

Check with your employer whether you can opt out of NEST (at which point you can transfer out, provided your employer has confirmed this to NEST) and then re-join again without having to wait for 12 months to do so. You'll lose some employer contributions by doing this, but if you're really bothered about fund choices, it might be worth considering.

Albermarle

Do you really think that your 'good ETF ' with HL , will outperform the Nest funds by 12 % pa ?

That assumes you are basic rate taxpayer . If you are a higher rate taxpayer then the difference is only 2 % 

The Nest Higher risk fund seems to have grown nearly 200% in the last 10 years and the Sharia fund by 300% . So not so bad really .

BuildTheWall

Nest charges 1.8% per contribution plus 0.3% annually. Will be paying £12 per purchase at HL. Roughly 2% lost at Nest. 

The latest NI hike will make Nest better. Net 11.25% NI saved for below 50k and 1.25% saved for above 50k. 

Running some numbers, any IT I select has to perform double that of Nest fund’s returns to break even in two years.  

My concern is their Sharia fund is a passive fund with a huge tilt towards big tech. Apple, google, fb, Microsoft and Tesla take up 30%. Would rather go for their ethical fund that is 65% actively managed equities. 

Albermarle

Nest charges 1.8% per contribution plus 0.3% annually. Will be paying £12 per purchase at HL. Roughly 2% lost at Nest. 

The £12 is only the cost to buy the ETF.

The ETF will have an annual % charge 

HL will charge 0.45% up to a limit of £200 pa on an ETF