Nest Shariah alternative to CPP offered

[posted]

Appreciate this post might not apply to most.

I’m currently in the DC scheme and invest in the Shariah fund. Have been happy with the performance over last~14 years, although the charges are slightly on the high side (one for another day but if we’re no longer contributing to the DC scheme then lower management charges should be negotiated).

Anyway I received my CPP letter today and I don’t know it’s a unique letter to each individual but because I invest in the Shariah fund of DC scheme, the letter mentions that an alternative to the CPP is that I can join the Nest shariah fund.

Here’s the basics of the arrangement
It’s is based on NEST Pensionable Pay (basic pay + OT for part timers, up to FTE hours)
RMG will contribute 13.6% of NPP
Employee contributes 6% of NPP, via PSE
Death in Service is 4 x NEST Pensionable Pay (no mention of additional dependents lump sum or whatever value of pot is).

Quite surprised this option is there as I thought the NEST arrangements were quite basic
So my understanding of the pros/cons are:
It’s a DC scheme
There’s no defined/separate lump sum
Therefore no Lump Sum Booster to take advantage of.
There’s no increases to the pot applied by RMG/trustees
NEST Pensionable pay doesn’t include allowances or bonuses.
The bit I need to seek clarification on the dependents lump sum.

The fund I believe it refers to is this one
https://www.nestpensions.org.uk/schemew ... -fund.html

Are there any other considerations I’ve missed?

[Hyrrokkin]

Thanks for the heads up

I am in the AVC DB scheme (Shariah Fund)

I have just got the forms delivered - interesting will have to way up the pros and cons.

My only real concern are fees...
I also want to continue with Shariah AVCs - as i understand it the NEST main pension scheme is Shariah + NEST AVCs would be in Shariah also...so all eggs in one basket kind of thing.

At least that is how i understand it......

[RobertT]

You may be interested to know that fees via Nest are on the steep side.

The annual management charge is 0.3% which is competitive, but there's also an initial charge of 1.8% on every payment that goes in.

https://www.nestpensions.org.uk/schemew ... -fees.html

[Hyrrokkin]

You may be interested to know that fees via Nest are on the steep side.

The annual management charge is 0.3% which is competitive, but there's also an initial charge of 1.8% on every payment that goes in.

https://www.nestpensions.org.uk/schemew ... -fees.html

Again thanks RobertT - you are the man (They should just give the contract to you instead of Capita and RMPP)

That 1.8% for every payment concerns me - so if i pay in weekly that is 1.8% every week as i understand it...that is steep.

Also if you choose the NEST Shariah scheme + NEST Shariah AVC scheme what is the NRA - assuming it is 67 or is it different ?

Questions to think about but i think i am leaning towards RM Collective plan + Lump Sum Booster + RM AVC while increasing my SIPP contributions also.

Interested to hear anybody else thoughts/opinions !

[RobertT]

Nest is basically the same as your SIPP, except you get the benefit of PSE on your payments and you get RM's contributions too.
You can access it from the legal minimum age(currently 55) and do exactly the same things with it, like drawdown or annuity.

[posted]

You may be interested to know that fees via Nest are on the steep side.

The annual management charge is 0.3% which is competitive, but there's also an initial charge of 1.8% on every payment that goes in.

https://www.nestpensions.org.uk/schemew ... -fees.html

Wow, thank you for that. That’s cheeky as when I was checking the main page comparing their funds, they only mention the 0.3% AMC.
It’s still cheaper than the Scottish Widows 0.5% AMC fee though the 1.8% is a right stinger … and they don’t even have a cap which is even more cheeky. I’m sure the cost, to the fund manager, of dealing/buying funds doesn’t increase in line with the value of the deal :(

I’ve just compared both the HSBC Islamic Global Equity Fund vs NEST Sharia fund. Both have very, very similar performance.
So if allowed, I may just at least look at seeing if I can transfer out my RMDCP from SW to the NEST Sharia account.
SW don’t charge a Transfer Out fee. NEST don’t charge a Transfer In fee, nor a contribution fee for the transfer.

Benefit of marginally reduced AMC and the pot is all in one place then.

Am I missing any other consideration?

[RobertT]

So if allowed, I may just at least look at seeing if I can transfer out my RMDCP from SW to the NEST Sharia account.
SW don’t charge a Transfer Out fee. NEST don’t charge a Transfer In fee, nor a contribution fee for the transfer.

Am I missing any other consideration?

Nest only accepts transfers in if you already have a workplace pension with them.

https://www.nestpensions.org.uk/schemew ... -pots.html

There are plenty of other pension providers that you could transfer to.

[Hyrrokkin]

You may be interested to know that fees via Nest are on the steep side.

The annual management charge is 0.3% which is competitive, but there's also an initial charge of 1.8% on every payment that goes in.

https://www.nestpensions.org.uk/schemew ... -fees.html

Did some reading - that 1.8% charge is to pay for the initial government loan to set the NEST scheme up (2008) - which they seem to think will take another decade(ish) to pay off.

[posted]

Nest only accepts transfers in if you already have a workplace pension with them.

https://www.nestpensions.org.uk/schemew ... -pots.html

There are plenty of other pension providers that you could transfer to.

Thank you, again (can't thank enough times!)
So this would be on premise that I joined the Nest scheme via RM but yes I'll also shop around too.

Did some reading - that 1.8% charge is to pay for the initial government loan to set the NEST scheme up (2008) - which they seem to think will take another decade(ish) to pay off.

My current DC pension pot is worth £280k so I'm paying ~£1400/pa in AMC
In NEST I would pay ~£850/pa in AMC, in the first year. So a saving on AMC of £550, which should increase as the pot grows.

I would have to contribute £30.5k each year before that 1.8% contribution equals (or negates) that £550 saving I could make, so on the face of it, it seems although I balked at the 1.8% charge, it's still a net saving compared the the SW scheme.

Especially if that 1.8% charge does eventually fizzle out

[koolishy67]

You may be interested to know that fees via Nest are on the steep side.

The annual management charge is 0.3% which is competitive, but there's also an initial charge of 1.8% on every payment that goes in.

https://www.nestpensions.org.uk/schemew ... -fees.html

Even with initial charges Sharia fund going to perform better than CPP

[steste]

Is there any official information on this anywhere? I can't seem to find any. How does one opt in etc?

I currently invest in the Sharia fund in my DC pension but received no such letter.

I was initially disappointed to see the only alternative to the CDC scheme was the nest scheme with only a 4% employer contribution all but forcing us into the CDC scheme. I personally would much prefer to stay in a DC scheme if possible.

[RobertT]

There is probably no such option, why would there be?

You can have 13.6% RM contribution into Nest instead of 4%, but only if you invest in the Sharia fund?
What happens if you change your investment choices?

Does it ring true to you?
It doesn't to me!

[regalia25]

I can confirm it's true. I had the same letter.

A DC arrangement with royal mail contributing 13.6% suits me fine with just a couple of years to do, especially not being tied to the 67 retirement age. I have filled in the forms and sent them back

I assume it's been offered to cater for those who do not wish to contribute to a non shariah compliant CDC scheme.

[RobertT]

Fair enough.

[Hyrrokkin]

I can confirm it's true. I had the same letter.

A DC arrangement with royal mail contributing 13.6% suits me fine with just a couple of years to do, especially not being tied to the 67 retirement age. I have filled in the forms and sent them back

I assume it's been offered to cater for those who do not wish to contribute to a non shariah compliant CDC scheme.

I received the letter and was going to go with the RMCPP but will have a good read about both schemes and weigh both up - was concerned about the NEST fees but now less so.
If the NEST scheme is not tied to NRA 67 that sounds right for me.