Nest Pension Underlying Fund Charges

r2014

Hello,

I'm trying to understand the true cost of the Nest Pension scheme.

Yes, I see these charges: 1.8% charge on every contribution paid into their pot. a 0.3% annual management charge

But what about the underlying fund charges?

For example, many of the Nest Scheme funds invest a significant weighting into the underlying fund "ubs/nest climate aware equities strategy":
(not able to post links)nestpensions.org.uk/schemeweb/dam/nestlibrary/Underlying-holdings-Q3-2023.pdf

Where can someone find the charges of such underlying funds?

In my mind, this could have a significant impact on comparison of private pensions, or at least how they will likely perform after costs and fees...

If 46% of your pension is invested in an underlying fund which charges 1% per year, this could* significantly erode performance of the outer wrapper fund overtime...

*Depending on whether or not the fund is able outperform the market to justify a higher fee

dunstonh

But what about the underlying fund charges?

Nest offers bundled funds.   So, the 0.3% covers product provision and fund management.

If 46% of your pension is invested in an underlying fund which charges 1% per year, this could* significantly erode performance of the outer wrapper fund overtime...

Except that isn't how it works.  So, don't worry.

Bostonerimus1

I applaud having a scheme like NEST available to people in the UK…however, their charges are “a disgrace”.  The 0.3% fund charge is ok I suppose, although it could be lower, but the contribution fee is ridiculous.

r2014

dunstonh said:

But what about the underlying fund charges?

Nest offers bundled funds.   So, the 0.3% covers product provision and fund management.

If 46% of your pension is invested in an underlying fund which charges 1% per year, this could* significantly erode performance of the outer wrapper fund overtime...

Except that isn't how it works.  So, don't worry.

Thanks for the quick response...
Just to clarify, I think you are saying that the 0.3% covers all underlying fund charges.

So even if one of the underlying funds happens to charge 1%, the weighted average must be coming in less than 0.3%?

QrizB

r2014 said:

dunstonh said:

But what about the underlying fund charges?

Nest offers bundled funds.   So, the 0.3% covers product provision and fund management.

If 46% of your pension is invested in an underlying fund which charges 1% per year, this could* significantly erode performance of the outer wrapper fund overtime...

Except that isn't how it works.  So, don't worry.

Thanks for the quick response...
Just to clarify, I think you are saying that the 0.3% covers all underlying fund charges.
So even if one of the underlying funds happens to charge 1%, the weighted average must be coming in less than 0.3%?

I think what's being said is that, regardless of wheter the weighted average of the fund charges is 0.3%, 0.03% or 3%, the charge to the consumer is 0.3%.

Albermarle

QrizB said:

r2014 said:

dunstonh said:

But what about the underlying fund charges?

Nest offers bundled funds.   So, the 0.3% covers product provision and fund management.

If 46% of your pension is invested in an underlying fund which charges 1% per year, this could* significantly erode performance of the outer wrapper fund overtime...

Except that isn't how it works.  So, don't worry.

Thanks for the quick response...
Just to clarify, I think you are saying that the 0.3% covers all underlying fund charges.
So even if one of the underlying funds happens to charge 1%, the weighted average must be coming in less than 0.3%?

I think what's being said is that, regardless of wheter the weighted average of the fund charges is 0.3%, 0.03% or 3%, the charge to the consumer is 0.3%.

Yes the 0.3% charge covers everything, so nothing on top of that.

HappyHarry

Bostonerimus1 said:

I applaud having a scheme like NEST available to people in the UK…however, their charges are “a disgrace”.  The 0.3% fund charge is ok I suppose, although it could be lower, but the contribution fee is ridiculous.

In theory, that initial fee will be reduced once enough fees have been taken to pay for the set up of the NEST scheme.

https://www.nestpensions.org.uk/schemeweb/dam/nestlibrary/helpcentre-documents/Helpful-resources-Employer/low-charges-for-future-members-of-NEST-PDF.pdf

Marcon

HappyHarry said:

Bostonerimus1 said:

I applaud having a scheme like NEST available to people in the UK…however, their charges are “a disgrace”.  The 0.3% fund charge is ok I suppose, although it could be lower, but the contribution fee is ridiculous.

In theory, that initial fee will be reduced once enough fees have been taken to pay for the set up of the NEST scheme.

https://www.nestpensions.org.uk/schemeweb/dam/nestlibrary/helpcentre-documents/Helpful-resources-Employer/low-charges-for-future-members-of-NEST-PDF.pdf

...and in which decade/century do we think that's going to happen? Answers on a postcard...

najan49

Marcon said:

HappyHarry said:

Bostonerimus1 said:

I applaud having a scheme like NEST available to people in the UK…however, their charges are “a disgrace”.  The 0.3% fund charge is ok I suppose, although it could be lower, but the contribution fee is ridiculous.

In theory, that initial fee will be reduced once enough fees have been taken to pay for the set up of the NEST scheme.

https://www.nestpensions.org.uk/schemeweb/dam/nestlibrary/helpcentre-documents/Helpful-resources-Employer/low-charges-for-future-members-of-NEST-PDF.pdf

...and in which decade/century do we think that's going to happen? Answers on a postcard...

According to their latest annual report they will no longer require external funding from next year, and project repaying the DWP loan by 2038.

r2014

I think what's being said is that, regardless of wheter the weighted average of the fund charges is 0.3%, 0.03% or 3%, the charge to the consumer is 0.3%.

Sorry, but I don't see how that can be true.  If the total cost of the underlying funds were 3% for argument sake (I suspect they are not), contributors definitely would be paying for it one way or another, because the 0.3% doesn't cover 3%. 

Even if it isn't 'charged' as a fee to the consumer in an explicit way, it is coming out of the consumers potential returns... so a hidden fee.

To clarify, I'm loosely trying to compare the cost effectiveness of the Nest pension to say a low cost passive SIPP. 

In a SIPP you may pay fees akin to the 0.3% (A platform fee).  Then, for each individual 'fund' you invest, there will be a fee that goes to the fund provider... sometimes as low as 0.06% and sometimes 1%.

You could argue that it is not comparable unless you replicate the same asset holdings and approach, but I'm just aiming for cheap and simple for now!

QrizB

r2014 said:

I think what's being said is that, regardless of wheter the weighted average of the fund charges is 0.3%, 0.03% or 3%, the charge to the consumer is 0.3%.

Sorry, but I don't see how that can be true.

That doesn't stop it being true, though.

r2014 said:

Even if it isn't 'charged' as a fee to the consumer in an explicit way, it is coming out of the consumers potential returns... so a hidden fee.

There's no evidence for tht. And if it was happening, they'd have to disclose it.

r2014 said:

To clarify, I'm loosely trying to compare the cost effectiveness of the Nest pension to say a low cost passive SIPP. 
In a SIPP you may pay fees akin to the 0.3% (A platform fee).  Then, for each individual 'fund' you invest, there will be a fee that goes to the fund provider... sometimes as low as 0.06% and sometimes 1%.

Nest has a 1.8% initial fee, zero platform fee and a 0.3% ongoing charge. You can compare that with a SIPP pretty easily.