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NEST Pension vs SIPP
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BigGrumpies
Posts: 4 Newbie

I (25m) currently work with my dad as his only employee (42k/annum) in a limited company. I need to sign up for a pension scheme. Our accountant has stated that the default pension scheme for us would be the NEST pension, and that once registered I could optionally switch the pension to a SIPP or other pension types.
With it just being myself there is flexibility with regard to which pension scheme we go for, with my dad being willing to match my contribution.
I just wanted to see if anyone has any advice/experience with NEST, if a different pension with more portfolio options would be better and whether the NEST Sharia fund is that much riskier than the NEST High Risk fund.
With it just being myself there is flexibility with regard to which pension scheme we go for, with my dad being willing to match my contribution.
I just wanted to see if anyone has any advice/experience with NEST, if a different pension with more portfolio options would be better and whether the NEST Sharia fund is that much riskier than the NEST High Risk fund.
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Comments
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The main issue with Nest is they charge 1.8% on all new contributions. Other providers have no such charge.
However their ongoing charge of 0.3% all in is pretty competitive.
So it wouldn’t really make sense to take the 1.8% hit. and then transfer out to a provider if they had higher ongoing charges.
Better to stick with nest or use a different provider from the start.
Yes the sharia fund is more risky, as it is concentrated on Big Tech in the US. This has produced great growth for the fund so far though2 -
NEST Pension vs SIPPA bit like saying McDonalds or a top restaurant.Incorrect. Your father can choose any auto-enrolment scheme and there is no default. Nest is just one of the options for employees.
Our accountant has stated that the default pension scheme for us would be the NEST pension, and that once registered I could optionally switch the pension to a SIPP or other pension types.
If you are a director, then he doesn't have to set up an auto-enrolment scheme. If you are not a director and just an employee, then he does. As a single employee, Nest would make sense as they are one of the best geared for a handful of employees. The other ones that deal with small numbers of employees have higher charges for the employer.I just wanted to see if anyone has any advice/experience with NEST, if a different pension with more portfolio options would be better and whether the NEST Sharia fund is that much riskier than the NEST High Risk fund.The Sharia fund is extremely high risk. Potential for 75% losses in a 12 month period. Its heavily weighted to tech. Tech has boomed in this cycle but tech is one of those areas that floats between boom and bust. So, its highly volatile. The largest downturn with tech saw 90% losses from peak to trough and took 16 years to recover. Some believe Tech is on the brink of another massive drop. However, these things are unpredictable. A very large drop will happen but no-one knows when but it will almost certainly be much bigger than the rest of the general stockmarket.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.2 -
Albermarle said:The main issue with Nest is they charge 1.8% on all new contributions. Other providers have no such charge.
However their ongoing charge of 0.3% all in is pretty competitive.
So it wouldn’t really make sense to take the 1.8% hit. and then transfer out to a provider if they had higher ongoing charges.
Better to stick with nest or use a different provider from the start.
Yes the sharia fund is more risky, as it is concentrated on Big Tech in the US. This has produced great growth for the fund so far though0 -
dunstonh said:NEST Pension vs SIPPA bit like saying McDonalds or a top restaurant.Incorrect. Your father can choose any auto-enrolment scheme and there is no default. Nest is just one of the options for employees.
Our accountant has stated that the default pension scheme for us would be the NEST pension, and that once registered I could optionally switch the pension to a SIPP or other pension types.
If you are a director, then he doesn't have to set up an auto-enrolment scheme. If you are not a director and just an employee, then he does. As a single employee, Nest would make sense as they are one of the best geared for a handful of employees. The other ones that deal with small numbers of employees have higher charges for the employer.I just wanted to see if anyone has any advice/experience with NEST, if a different pension with more portfolio options would be better and whether the NEST Sharia fund is that much riskier than the NEST High Risk fund.The Sharia fund is extremely high risk. Potential for 75% losses in a 12 month period. Its heavily weighted to tech. Tech has boomed in this cycle but tech is one of those areas that floats between boom and bust. So, its highly volatile. The largest downturn with tech saw 90% losses from peak to trough and took 16 years to recover. Some believe Tech is on the brink of another massive drop. However, these things are unpredictable. A very large drop will happen but no-one knows when but it will almost certainly be much bigger than the rest of the general stockmarket.
When you say that Nest is more suited to smaller companies, are there any other SIPPs to your knowledge which would be comparable or would it be best to stick with Nest? What makes Nest better for small companies?
I also see that Nest doesn't charge you a fee to move your pension between funds. My interpretation of this is that I could invest in the Sharia fund and then if the US tech market took a downward turn I could move my money to a lower risk Nest fund without a fee- is that correct?0 -
BigGrumpies said:Does that mean that I will have to pay 1.8% on my first contribution or will every contribution be at the 0.3%?1
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I am curious though why you are not already enrolled? This has been the case although in stages since 2012. You are over 21 and earning at least £10k so by now you should already been enrolled.
If you are only very recently employed then I can understand that but has your employer supplied you with relevant paperworks that are normally for the new starters?
If you was employed with the same company for last three years then this should be been sorted out at that point.
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JoeCrystal said:I am curious though why you are not already enrolled? This has been the case although in stages since 2012. You are over 21 and earning at least £10k so by now you should already been enrolled.
If you are only very recently employed then I can understand that but has your employer supplied you with relevant paperworks that are normally for the new starters?
If you was employed with the same company for last three years then this should be been sorted out at that point.0 -
When you say that Nest is more suited to smaller companies, are there any other SIPPs to your knowledge which would be comparable or would it be best to stick with Nest? What makes Nest better for small companies?The vast majority of SIPPs are not auto-enrolment compliant. So, whilst your dad could pay into the SIPP from the limited company, that is because he isn't captured by auto-enrolment. You are captured by AE because you are an employee.My interpretation of this is that I could invest in the Sharia fund and then if the US tech market took a downward turn I could move my money to a lower risk Nest fund without a fee- is that correct?Transferring it after a drop would be too late.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Large companies can afford to pay to have their own pension fund whether it is in house or with a large pension admin firm. Smaller companies (which is why your accountant probably picked this idea) go for Nest as it's easy. Nest is also good for those individuals who might switch and swop employers more frequently (building trade for instance) so that they can continue in the same scheme.
No reason why in your circumstances a SIPP with a large investment group couldn't be a good alternative for you. Why not talk to an IFA (not a FA who is tied to a company) who might be able to give you a better idea of what suits you in particular. Normally chats for an initial hour are free so you can see if you are a good match to the IFA. Check who's in your area on vouchedfor.co.uk.I’m a Forum Ambassador and I support the Forum Team on Debt Free Wannabe, Old Style Money Saving and Pensions boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
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BigGrumpies said:JoeCrystal said:I am curious though why you are not already enrolled? This has been the case although in stages since 2012. You are over 21 and earning at least £10k so by now you should already been enrolled.
If you are only very recently employed then I can understand that but has your employer supplied you with relevant paperworks that are normally for the new starters?
If you was employed with the same company for last three years then this should be been sorted out at that point.
As this website pointed out ,https://www.thepensionsregulator.gov.uk/en/business-advisers/automatic-enrolment-guide-for-business-advisers/duties-for-new-employers
Your employer has legal duties from the moment they employ you. Your employer have automatic enrolment duties that he must comply with straight away. The duties apply from your first day of employment
Sorry to be quite blunt about it.
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