Any views on NEST?

LV_426

I've just been offered a new job. The company makes an 8% contribution into NEST. I would make a contribution of 12%.
I've never used them before, but they appear to offer some limited choice of funds, with the default being a standard retirement fund, based on your SPA. 
However there are some other funds, including higher/lower risk.
I have 6 other pension schemes from previous employers, which I do need to consolidate at some point. But I don't think NEST would be the place to combine them all.
Any thoughts?

jamesd

It's a fine choice for employers who are too lazy or small to pick something better or perhaps who think that their employees are too clueless to notice or care.

For employees it's poor and the least bad investment option appears to be their Sharia fund.

Note that NEST sabotages people's retirements by using low growth investments for long periods at the start and end of the retirement plan. You can undo that by picking your own fund and turning off lifestyling.

NEST has said that they do it early because drops scare newcomers, instead of explaining it, which isn't hard. For late their reasoning is more complex but still not great.

Don't let this put you off joining the scheme. If it's what the employer offers, join it. Just don't pay in any more to NEST than it takes to get maximum employer matching, use a better pension choice for any extra.

Alexland

It seems to be possible to do Salary Sacrifice to avoid paying national insurance with Nest but most employers don't tend to bother so this might be worth clarifying with their payroll department if you intend to make substantial contributions into the scheme. Last time I looked at their charges they had a high initial contribution charge followed by a low ongoing charge which is good if you intend to leave the money with them in the long term but not good if you intend to transfer it out within a few years. Overall I am glad my employer doesn't use Nest it would put me off working there. Still there are worse schemes and an 8% employer contribution isn't bad these days for new starters.

Albermarle

Last time I looked at their charges they had a high initial contribution charge followed by a low ongoing charge which is good if you intend to leave the money with them in the long term but not good if you intend to transfer it out within a few years.

Yes , and this system of a high initial charge ( 1.8% ) on contributions and a low ongoing charge ( 0.3%) is pretty unusual ( unique?) In fact just having an initial charge at all is in itself unusual.

One point worth clarifying is that they do not make this charge on pensions transferred to them .

LV_426

Thanks folks, good comments. I can see it's not the best for employees in terms of performance. 
I've looked at the relative performance of the NEST funds, and some are better than others, so a little bit of flexibility there.
But as I said, I've got other pension schemes, and as suggested I may continue to contribute into one of those, while putting the minimum employee contribution (4%) into NEST.
The job is a good one, and there are other benefits, such as car allowance, which I don't actually need, so that money can go straight into my pension.

MX5huggy

NEST 2040 vs VG LS 80.

Alexland

Albermarle said:

Yes , and this system of a high initial charge ( 1.8% ) on contributions and a low ongoing charge ( 0.3%) is pretty unusual ( unique?) In fact just having an initial charge at all is in itself unusual

One point worth clarifying is that they do not make this charge on pensions transferred to them .

Yes although even 0.3% might not be considered low or worth paying that initial charge much longer. Since moving to a master trust our employer's pension now offers a developed world tracker fund for 0.19% so only slightly more expensive than holding a similar ETF in our capped Fidelity SIPP.

A few years ago we were getting various new forum members complaining about the Nest transfer process as they seemed to be asking the members to submit the transfer paperwork the wrong way around which was rightly incompatible with the expectations of other pension schemes in how the process should work - but that was a while ago so maybe they have fixed that now.

ajfielden said:

The job is a good one, and there are other benefits, such as car allowance, which I don't actually need, so that money can go straight into my pension.

Check if the employer operates salary sacrifice before deciding which pension(s) will recieve the contributions. It's less important if you are contributing higher rate income as the NI rate is low anyway but at basic rate it's really good to save that NI especially if making substantial contributions.

LV_426

Yes I've checked and it is salary sacrifice.

Alexland

ajfielden said:

Yes I've checked and it is salary sacrifice.

That's a good sign they are willing to do that for their employees.

Some even go the extra mile and also pass on the employer NI saving but that seems to be pretty rare.

Mine claims that saving goes into the extra costs of running the sal sac admin. Hmm.

LV_426

MX5huggy said:

NEST 2040 vs VG LS 80.

Doesn't look too shabby.

jamesd

The 2040 fund is flattered by being in its growth phase, rather than the low growth foundation, consolidation or post-retirement phases. Even so, if a person is young, I'd prefer 100% equities to 80%.