What fees does the NEST workplace pension charge?

Full answer

NEST was set up by the government specifically to ensure every UK employer had access to a low-cost, straightforward workplace pension scheme to meet their auto-enrolment duties, and its charging structure reflects that public-service origin. NEST applies two separate charges: a 1.8% contribution charge, deducted from each individual contribution at the point it is paid into your pot (so if you and your employer together pay in £200 in a month, roughly £3.60 is deducted as this charge before the remaining £196.40 is invested), and an annual management charge (AMC) of 0.3%, calculated on the total value of your pension pot and deducted gradually over the course of each year, similar to the ongoing charge figure disclosed by most other pension providers and funds. Combined, these two charges mean the effective total cost in the first year on new contributions is higher than the 0.3% AMC alone would suggest (because of the extra 1.8% up-front charge on new money), but the ongoing effective annual cost trends down towards close to the 0.3% AMC figure over time as your pot value grows relative to new contributions, making NEST progressively cheaper in percentage terms the longer you are a member and the larger your existing pot becomes relative to new contributions each year. By comparison with the pension charge cap that applies to the default fund used for auto-enrolment (0.75% per year, a legal maximum for qualifying schemes), NEST's charges are generally competitive, particularly for smaller pots and employees moving between jobs frequently, since NEST is designed to accept and retain pots of any size without additional fees for dormant or small accounts, unlike some older-style stakeholder or personal pensions that historically applied higher charges on small or inactive pots. Use the Pension calculator to model how NEST's charging structure affects your projected retirement pot compared with an alternative workplace scheme.

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