NEST’s stellar returns vs. steep fees: Why I picked a different workplace pension for my team

As someone who reviews financial products for a living, it stands to reason that choosing a workplace pension provider for my own staff came with a level of research probably not undertaken by your average HR department.

But, I wanted to ensure we were giving our staff the best possible vehicle for their retirement savings, and I’m confident my choice will result in thousands added to their retirement pots over time.

NEST’s investment track record is excellent, but the upfront 1.8% slice it takes from every pound my staff invest would skim nearly £200 off each £10,000 we pay in. Over a career, that’s real money my team should be compounding, not handing over in fees.

For a worker earning £30,000 who contributes the statutory 8% for 30 years, NEST’s 1.8 % haircut would shave c. £1,300 off their pot before investment growth – even before the 0.3 % AMC is applied.

When margins are tight, my priority is maximising every pound of staff pay that lands in their pension. Paying almost 2p in the pound straight to the provider didn’t feel like value.

NEST currently manages £50 billion for 13 million members, which makes them the largest pension provider by headcount. And while NEST’s investment team has consistently outperformed many of their competitors, critics have noted that the scheme is still repaying a government start-up loan, which the provider often cites to justify the hefty contribution charge.

According to UK Parliament Committees, the government’s 0.75% charge cap applies only to the ongoing annual fee, and not to upfront levies. Most mainstream auto-enrolment defaults cluster around 0.5% AMC with no contribution charge.

This revelation prompted me and my team to spend some time researching the workplace pension providers on offer – something I would encourage all SMEs to do. We even went as far as to build a pension performance tool, which allows staff and employers to make fully informed decisions.