PensionBee vs. Nest: what’s the difference?

PensionBee vs. Nest: what’s the difference?

PensionBee and The National Employment Savings Trust (Nest) each offer unique pension options, meeting different needs for UK retirement savings.

Nest is a government-backed workplace pension scheme designed to help employers meet auto-enrolment rules (a set of rules under which employers need to automatically enrol qualifying employees into a workplace pension scheme and contribute on their behalf).

Nest is an accessible option for employers across the UK.

PensionBee, on the other hand, is a private company specialising in pension consolidation, helping people who’ve built up multiple pension pots over the years manage them in one place.

Nest is ideal for straightforward workplace pensions, while PensionBee provides a streamlined solution for bringing all your pensions together under one roof.

If you’re self-employed, you can set up a pension via Nest and PensionBee.

What are Nest and PensionBee’s specific pension strategies?

When it comes to investment strategy, PensionBee and Nest take different approaches.

Nest’s investment options include low-cost, diversified pension funds for long-term workplace savings. Its “glide path” strategy means your funds start in higher-growth investments when you’re younger and gradually shift to safer assets as retirement nears.

Nest’s fees include an annual management charge and a contribution fee. More on fees below.

Nest has several plans:

• Retirement date fund: Your money is put in a pension fund corresponding to your state pension age and is invested, but these investments change over time to reduce risk.

• Ethical fund: This is for those concerned about the impact of companies on the environment and society, so it excludes certain companies and products from the fund. For instance, it avoids firms involved in weapons, cosmetic animal testing and controversial mining.

• Shariah fund: Your money is invested in Shariah-compliant company shares and bonds.

• Higher risk fund: This pension fund aims for a higher return than the retirement date fund by investing more of your money in company shares.

• Lower growth fund: This is for more cautious investors, so your money will be invested in bonds. The fund prioritises capital preservation over growth, meaning it tries to avoid losing money, focusing on ‘steady’ rather than fast-growing investments.

• Guided retirement fund: It is designed for those aged 60-70 with at least £10,000 invested in a Nest fund who want to start withdrawing their money. 

PensionBee is geared toward individuals who want to consolidate multiple pensions into one easy-to-manage plan, although you can also start a brand new pension pot with PensionBee.

With PensionBee’s investment options, you can choose from seven different plans:

• Global Leaders: Invests in around 1,000 of the world’s largest public companies. It is the default plan for under-50s.

• Tracker: Invests your funds in global shares and bonds.

• Climate: Aims for a 10% reduction in the total carbon emissions from companies in the plan each year.

• 4Plus: This pension fund aims to achieve a return of  4% above the cash rate each year. It is the default plan for over-50s savers.

• Shariah: This pension fund invests money only in Shariah-compliant companies.

• Preserve: This fund makes short-term investments into creditworthy companies.

• Pre-annuity: This pension fund focuses on bonds, so your returns ‘broadly correspond’ to the cost of buying an annuity.

PensionBee’s fees work on a simple, single-fee basis, covering all costs without extra charges.

While Nest’s strategy focuses on gradual growth with regular contributions, PensionBee offers flexible fund choices for those seeking control over their pension investments.

What fees can I expect from Nest and PensionBee?

Nest’s fees include a 1.8% contribution fee plus a 0.3% annual management fee. The contribution fee means that each time you or your employer contributes to your pot, 1.8% of what you pay in is deducted.

Over time, this can add up if you’re contributing regularly and could offset the low annual management fee.

PensionBee keeps things simple with a single annual fee, varying from 0.5% to 0.95% depending on the plan. This fee covers all management and administration costs with no contribution fees.

For example, if you choose a plan with a 0.7% fee and have £20,000 saved, your annual fee would be £140. Without contribution fees, PensionBee could be ideal for those contributing regularly.

So, while Nest’s annual management fee is lower, its contribution charge might impact long-term growth depending on how often you pay in.

Is PensionBee or Nest better?

Choosing between Nest or PensionBee depends on what works best for you as a pension saver.

Both offer solid retirement savings solutions, but their differences could make one a better fit than the other, depending on your needs.

The pros of using Nest:

• Government-backed security: Some may feel reassured using a pension scheme set up by the UK government, with Nest accountable to Parliament via the Department for Work and Pensions.

• Low annual management fee of 0.3%: A low annual management fee can reduce the impact of high fees on your returns. However, the contribution charge is a huge drawback to consider.

• Offers pension funds that meet different needs: Nest offers an ethical fund and a Shariah fund, suitable for those interested in values-based investing.

The cons of using Nest:

• The 1.8% contribution fee could affect returns over time: The contribution fee can add up significantly and impact overall returns, leaving you with less money for retirement.

• Limited fund choice: While there are six pension funds available, some pension savers may want a wider range to choose from.

The pros of using PensionBee:

• There is a single annual fee structure with no contribution charge: Pension fees can have a significant impact on long-term returns, so PensionBee’s single fee is useful to help savers understand exactly how much they’ll pay.

• Multiple investment options: Similar to Nest, there are a few pension funds to choose from, including an ethical fund and one including Shariah-compliant firms.

• User-friendly app and website: There are many handy features, such as a pension calculator, the ability to combine your pensions and make contributions, and a retirement planner. It aims to make contributions flexible so you can change the amount and frequency easily.

The cons of using PensionBee:

• There are higher annual fees than Nest: PensionBee’s annual fee is up to 0.95%, so it’s higher compared to Nest, although Nest’s contribution charge may offset this.

• It’s not government-backed: Some pension savers may prefer to use a government-backed provider, although PensionBee is authorised and regulated by the Financial Conduct Authority (FCA).

• Focuses on pension consolidation: PensionBee wants to help people make it easier to access their pensions via one fund instead of focusing on workplace pensions, so it might not be suitable for everyone, especially if you don’t want to consolidate your pots. 

PensionBee or Nest: which should I choose?

Choosing between PensionBee and Nest depends on what’s most important to you.

Nest is a solid choice if you’re looking for a government-backed workplace pension.

However, if consolidating multiple pensions is a priority, PensionBee might be the better fit. PensionBee prioritises flexible contributions, which could make it useful for freelancers or those with a variable income who don’t want to pay in the same amount each month.

Can you have an account with both Nest and PensionBee?

Yes, you can have accounts with both PensionBee and Nest. If you have a workplace pension through Nest but want to combine other pensions under PensionBee, this is possible.

You should keep in mind any pension allowances as well as tax implications when it comes to accessing your pot at retirement. 

Can I access my PensionBee and Nest accounts through their websites and mobile apps?

Both platforms make it easy to monitor your savings through their websites and mobile apps.

 The PensionBee and Nest apps allow you to check balances, view statements, and track performance on your smartphone. 

Get expert financial advice

Whether Nest or PensionBee is the better choice depends on your personal needs. Nest provides a government-backed option for workplace pensions, while PensionBee offers flexibility and convenience for those looking to consolidate and manage multiple pensions in one place. 

By weighing up fees, investment options, and the support each platform offers, you’ll be better equipped to choose the pension provider that aligns with your retirement goals.

Let Unbiased match you with a financial adviser for expert financial advice on planning your pension and securing your retirement.