Should I look at Nutmeg for my pension?

16 December 2021

Question by Mark

I have £63,000 in a Reassure Pension, unfortunately they have not helped build my pension, neither has my financial advisor. Where do I start to look at Nutmeg as an option? Thanks, Mark

Answered by Holly Mackay

Hi Mark

Nutmeg is the UK’s largest ‘robo advisor’ and now owned by US giant JP Morgan, which gives a solid parent behind the scenes.

They are good for those wanting a simple, easy to maintain option at a decent price. But whether they suit you or not really depends on what you need and want.

I think Nutmeg’s pension is a decent option for those people who are not yet at the point of retirement, but want something they can set up, pay into and then forget. You will pay between about 0.7% and 1% a year depending on which of their 4 options you choose. On £63,000, this means you will pay between about £440 and £630 a year and that includes everything. All admin, statements, investments inside your pension account and any transactions.

Like all other choices, your pension account with Nutmeg will ultimately rise or fall with markets. So if 2022 is a bad year, you will not see the pension grow but that’s not really their fault. You need a few years to assess skill over luck. We do track performance of robo advisors and Nutmeg is generally a pretty solid performer.

Where I think they are less good is for people who are at the point of retirement and need some advice. It’s one thing to save up for a pension. But it’s a whole new ball game to actually start to take money out and plan a retirement. You can make major stuff-ups at this point – pay far too much tax, take too much out at the start and so sit in cash for too long- and these sorts of mistakes can be far more expensive than any advice fees.

There are some lower cost options out there called Digital Advice, which are set-up for people who don’t want or cant afford traditional financial advice but want and need a helping hand. If you are under 55 try Vanguard. Or if retirement is nearer have a look at abrdn or Destination Retirement – all of these are in our Digital Advice table.

Finally you say that your current options have not helped you to build your pension. I presume you’re talking about the amount in value it has gone up. There is a trade off between risk and return. Are you in a ‘risky’ enough option? (Which in finance-speak means, have you got a high enough % in shares?) This decision will depend on lots of things, but a key one is timeframes. If you are close to retirement you may want to lock in certainty (typically delivered by cash) at the expense of potentially greater gains (typically delivered by shares, but with a much bumpier ride which will include some bad years). If you are still a decade or more off retiring, it’s usually sensible to have mostly shares or ‘equities’ in your account as they stand a higher chance of growth over the long-term. So whether you go for Nutmeg or another DIY option, do read up on the ‘risk profile’ you choose as this will make a material difference on your long-term gains. We have loads of articles on the site for more reading on risk and returns.

I hope this helps and good luck.

Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.