Please help re transferring pensions into NEST. Is it worth it?

Marcon

ET22 said:

@Marcon, sorry forgive my ignorance, but other private pension schemes offer more flexibility? i read somewhere on here just now its not wise to invest into a pension which invests in UK equity funds? So i need to find one that offers a variety of different investment options?     

Virtually all personal pensions offer a huge range of choices, so you won't need to look far! What you read on here isn't gospel (and isn't always right) and may not apply to your circumstances/attitude to risk etc. What does make sense is to understand more about the funds on offer, and the providers normally have plenty of information on their websites.

ET22 said:

Hi, Im looking for advice re transferring civil service, council and private pensions into NEST? I started work in the civil service mid 90's for a couple of years meaning the pension is only 1000 p.a.,worked for the council starting 2011 to 2015 which is also 1000 p.a and have a couple of private pensions with small amounts in. 

I understand i will be charged exit fees by the private pensions. My question is mainly the civil service and council pensions. Is it worth transferring them into my NESTpension? I am planning on retiring in 15 years time.
    

Are those figures projected to retirement age (unlikely), or the pension at the time you left?

Exit fees aren't common, so I wonder why you think you'll be charged one?

You can't transfer your civil service pension to NEST, and NEST won't accept a transfer from the LGPS, so happily no decision for you to take in that respect.

ET22 said:

Any advise would be very welcome and much appreciated as I want to sort it all out in January         

You've done nothing for the last 25 years in respect of your two DB pensions (which is actually good!), so don't let a worthy New Year resolution rush you into a decision. 

Maybe learning a bit more about pensions before taking any sort of action would give you a much better outcome. Lots of basic info here: https://www.moneyhelper.org.uk/en/pensions-and-retirement

ET22

Thankyou all for taking the time to respond. The CS one, ive been getting" preserved pension benefit statements" which ive just compared, the most recent to the previous one. So I think youre right. 

The council one, ive just re read and its said the value of benefits in their employment is nearly 65000 which explains why a previous poster said it was likely worth more than 30 thousand so would likely have needed advice before moving it. Its over 3 grand a year anyway. 

I read about exit fees on a  website somewhere so assumed it was true for all.  

I will definitely access the link youve included and research it.I dont want anything too risk averse like Nest seems to be but I will look at it all. 

I have  Aviva and Options one too so i'll check them before i do anything but I have a feeling Im likely to close the Options one from the brief info Ive read online.

Thankyou for pointing me in the right direction.x 

xylophone

I dont want anything too risk averse like Nest

Your mention of a transfer in to NEST made me think that this was your current workplace pension - is this not the case?

Are you currently employed and a member of a pension scheme other than NEST?

Linton

ET22 said:

@Marcon, sorry forgive my ignorance, but other private pension schemes offer more flexibility? i read somewhere on here just now its not wise to invest into a pension which invests in UK equity funds? So i need to find one that offers a variety of different investment options?     

Your CS pension does not depend on investments.  As a DB pension the employer (in the CS case, the Government) guarantees an inflation linked amount of income each month in retirement based on your wages whilst working.  So as stated effectively deferred wages.

A DC pension simply holds a pot of money, some contributed by you and some by your employer.  There is no guarantee how much  you will get each month in retirement. 

A DB pension will generally give a higher retirement income than a DC one with the same employee contributions.

A DC pension has flexibility and risk in that you can invest in a wide range of funds which may be good or bad.  If I remember ciorrectly NEST offer very little or zero choice.  In a DC pension there will be annual charges, NESTs charges are rather high.

The one advantage of DC pensions, apart from them being cheaper for the employer, is that you have a wide choice of how much and when you withdraw the money.  Unlike a DB pension you are not restricted to £x/month.

The financial benefits of DB pensions are large but many people with them do not appreciate this.  Therefore the goverment has mandated procedures to help ensure that people who want to transfer can understand what they are doing.   In the case of CS pensions the government has banned trasfers-out since they do not want to pay large sums now rather than use future tax income..

Albermarle

ET22 said:

@Linton , do you know why are people trying to get out of NEST?  I presume theyre paying into private pension schemes instead. Has NEST performed poorly? 

I think like many posters you are mixing up the pension provider with the investments within them.
The pension provider ( Nest for example) can be best seen as an administrator of your pension. They take in payments, organise withdrawals when appropriate and tax them correctly, add tax relief etc.
They also offer a range of investments within the pension, and you can choose which ones you want your money to go into.
So you could be in Nest and choose Investment fund A and it performs poorly
Another person could also be in Nest and choose Investment Fund B which performs well.
So you both have a Nest pension, but get a different result.
So the pension itself does not perform but the investments within it do. 

If you transfer to another pension provider, then it will also be the investments you choose within it that is important.

jamesd

Exit fees are prohibited for new pension contracts started on 31 March 2017 or later, mostly capped at 1% for older ones and were uncommon anyway before the rule change.

There are two main good reasons to transfer out of NEST:

1. It offers no truly good investment options, lacking even a basic global equity tracker fund. The least bad seems to be their Sharia fund.

2. It uses low growth options for a very long time in the early years and approaching your nominated retirement date. You can reduce this low growth aspect by choosing to turn off lifestyling and not using any target date funds.

Think of NEST as the pension for employers who don't care and employees who can't be bothered to pick something on it's merits.

Annuities can still be bought but after the pension changes in 2015 people finally noticed that they had become optional ten years earlier and there was a huge reduction in sales. Income drawdown was substituted, which just means taking an income from investments.

State pension deferral pays more than annuities, 5.8% increase per year deferred with uncapped inflation increases, so that's a more efficient way to get extra guaranteed income. You just draw from your investments to replace your state pension while deferring for say five years and take the 5 years extra 29% addition. Using 2023-4 rates and only the single tier state pension the cost is £203.85 a week and the five year increase is £58.94, annually £10,600.20 and £3,064.88. This 5.8% for CPI inflation linked income compares to the current 4.34% for an RPI annuity or 6.86% with no increases, both age 65.

Income drawdown using the Guyton--Klinger guidelines starts at about 5% in the UK and usually provides annual inflation increases but those can be skipped or increased or decreased based on the investment times you live through, the start is not cked to work even in the worst historic sequence. The simpler "4% rule" has uncapped inflation increases every year and starts at around 3.5% in the UK because it can't adjust down for bad times, much more is likely with average results and periodic resets. Similar but less increase than expected from GK though that starts closer to what you're likely to get. For all drawdown guidelines if you die all of the remaining capital is still around for inheritance, not already spent and gone as it is for lifetime annuities.

A blend combining state pension deferral, income drawdown and maybe some annuity buying is the more modern and likely better outcome producing alternative to the old lump sum and compulsory annuity purchase.

ET22

Ahhh ok so now I understand the CS deferred wage, the rise in the payment is due to inflation and not investment and the money is safe or you know what youre getting.I understand now why transfer outs are banned too. 

I just looked and NEST charges are 1.8% unlike other pensions such as Hargreaves and Landsdowne is 0.5 or something like that, so i get that bit now, thats helpful to know, thankyou 

Xylophone, I was self employed for years and briefly worked for an employer and a NEST account was opened but I didnt stay long so payments stopped. I have started work with a new employer and I know they automatically pay into NEST and make contributions on behalf of their employees. I will need to speak to them about that before they deduct anything. 

So, if I have another pension pot worth 140,000 , taking no lump sum payment, only an annuity , i will get around 10 grand a year? All together I mean ? x      

ET22

@Albermarle and @jamesd, sorry i just read your posts, wow thats a lot to understand but i will keep re reading until I do but I get the Nest thing being rubbish, I had a feeling it was all too easy x 

ET22

@jamesd, i get what you mean by the blended way being better although I'd have to think about it more so I know exactly what it is and how to do it. It is probably common place then for people to retire with a heck of a lot more than 200 grand x

xylophone

Xylophone, I was self employed for years and briefly worked for an employer and a NEST account was opened but I didnt stay long so payments stopped. I have started work with a new employer and I know they automatically pay into NEST and make contributions on behalf of their employees. I will need to speak to them about that before they deduct anything. 

 You will be automatically enrolled? But surely you wish to benefit from the employer contributions into NEST?

Your own contribution will be deducted from salary and you will benefit from tax relief.

It would certainly seem logical to combine the NEST accounts.

If you wish to make additional contributions to another pension (your existing £140,000 (SIPP/other personal pension/stakeholder), this should be possible and would also benefit from tax relief.

Are you a standard or higher rate tax payer?