Which pension to pay into NEST, AVIVA or something else

NorthernLas

I currently contribute to a NEST pension and also have an AVIVIA pension that I haven't contributed to since 2009. I'm 59 and work on contract via an Umbrella company.

I'm in a position where I can increase my contributions and I'm trying to work out if I should contribute a lump sum regularly to NEST, to AVIVA or to set up a new SIPP. I'd appreciate some pointers, so that I can get closer to making a decision.

1. NEST, yearly management charge is 0.3% plus 1.8% on deposits. The fund is one for 2030, assuming retirement at 67. 

2. I can access my AVIVA pension on-line and my funds are in AVIVA Deposit S2 fund. The yearly management charge is 0.65%. There are 219 funds with risk from 1 - 7.
- How do I begin to decide which fund to invest in? I understand about the 1 - 7 risk, but after that, what should I look for? I
- Also, 'm assuming that to get better returns on the existing pot I should be looking to move funds from the deposit S2 fund, but to where?

3. Should I instead open a SIPP, say with Vanguard?

While I see myself working until 65+, work is only guaranteed for the next couple of years.

A_T

1.8% is lot for contributions - over time a real drag on returns - I've been auto-enrolled into NEST a couple of times but got out immediately because of this

El_Torro

It's been some years since I used an Umbrella company. At the time they were able to contribute to a pension for me using salary sacrifice. Do you have this option? If so it should be more tax efficient than contributing yourself, depending on how much you earn.

Albermarle

As above it is important to know by which method your contributions are taken. different employers do it different ways.
RAS - after tax 
Net Pay - before tax
Salary Sacrifice- by reducing your actual salary

Should I instead open a SIPP, say with Vanguard?

Then you would still have to choose investments, so no advantage in that way.

NorthernLas

The umbrella company I am currently with does not offer salary sacrifice. However, I can look at moving to one that does. Currently, I am paid NMW + commission.
Current NEST contributions are 9% (NMW) and tax relief is added. Does this mean my contributions are taken after tax? 

I have assumed that I will need to learn how to choose investments. I have a basic grasp but where do I go to learn enough to understand if a fund with 60% shares is more appropriate for me than one with 20% shares?  

Albermarle

Current NEST contributions are 9% (NMW) and tax relief is added. Does this mean my contributions are taken after tax? 
Yes
The umbrella company I am currently with does not offer salary sacrifice. However, I can look at moving to one that does
Yes because you would also make some NI savings.

 I have a basic grasp but where do I go to learn enough to understand if a fund with 60% shares is more appropriate for me than one with 20% shares?  
The theory is quite simple.
Shares/equity can be volatile, so 100% equities are not really suited for medium term investing, or for the faint hearted.
On the other hand based on historical statistics being invested in100% equity will produce the best growth in the long run.
Normally the part that is not shares, are bonds of various types. They normally give some stability but low growth ( caveat is currently they are performing badly but that is unusual) So a 20% equity/cautious fund might be suitable for someone with a low tolerance to risk and not worried too much about long term growth.
Most UK investors take a classic middle road of 60 % equity.

So in the end it depends on your age/how long term the investments is + how tolerant you would be of your pension pot bouncing up and down a lot.

MX5huggy

A_T said:

1.8% is lot for contributions - over time a real drag on returns - I've been auto-enrolled into NEST a couple of times but got out immediately because of this

You gave up “free money” because the deposit fee is a bit high? 

A_T

MX5huggy said:

A_T said:

1.8% is lot for contributions - over time a real drag on returns - I've been auto-enrolled into NEST a couple of times but got out immediately because of this

You gave up “free money” because the deposit fee is a bit high? 

no i didn't give up anything. i did a lot better because the pension I used instead did not charge 1.8% on contributions

Albermarle

A_T said:

MX5huggy said:

A_T said:

1.8% is lot for contributions - over time a real drag on returns - I've been auto-enrolled into NEST a couple of times but got out immediately because of this

You gave up “free money” because the deposit fee is a bit high? 

no i didn't give up anything. i did a lot better because the pension I used instead did not charge 1.8% for deposits

Most employers will not pay into a separate pension set up by an employee. Obviously yours did, but it is not the norm.

Anyway if you stay in NEST for a few years, it evens itself out as the 0.3% ongoing charge is lower than most.

A_T

Albermarle said:

A_T said:

MX5huggy said:

A_T said:

1.8% is lot for contributions - over time a real drag on returns - I've been auto-enrolled into NEST a couple of times but got out immediately because of this

You gave up “free money” because the deposit fee is a bit high? 

no i didn't give up anything. i did a lot better because the pension I used instead did not charge 1.8% for deposits

Most employers will not pay into a separate pension set up by an employee. Obviously yours did, but it is not the norm.

Anyway if you stay in NEST for a few years, it evens itself out as the 0.3% ongoing charge is lower than most.

Then i feel sorry for those who have no choice but NEST. 1.8% on contributions is a hefty fee to pay.

dunstonh

A_T said:

Albermarle said:

A_T said:

MX5huggy said:

A_T said:

1.8% is lot for contributions - over time a real drag on returns - I've been auto-enrolled into NEST a couple of times but got out immediately because of this

You gave up “free money” because the deposit fee is a bit high? 

no i didn't give up anything. i did a lot better because the pension I used instead did not charge 1.8% for deposits

Most employers will not pay into a separate pension set up by an employee. Obviously yours did, but it is not the norm.

Anyway if you stay in NEST for a few years, it evens itself out as the 0.3% ongoing charge is lower than most.

Then i feel sorry for those who have no choice but NEST. 1.8% on contributions is a hefty fee to pay.

I personally disagree with NEST existing in the first place.  The taxpayer has no reason to fund commercial activity if the market is able to do the job.

However, employees can always tell their employer that they have chosen the only provider with an initial charge.   The likes of Now pensions or the peoples pension are slightly more expensive on annual charges but no initial.    On the other hand, for young people, a lower ongoing charge is usually better.