RIBA’s Pension Solution versus NEST – how they compare

Is it time to review your pension? Practices offering NEST as their auto-enrolment option may find the RIBA Pension Solution more cost effective and with greater choice for ethical investing – so called ESG funds – more appealing to their staff.

Any practice with staff aged 21 and over and earning more than £10,000 a year will have automatically enrolled them in a company pension scheme. But are practices offering their employees access to the most cost effective and most appropriate pension provider? We know that many may have opted for the NEST scheme, it’s the one that’s probably most familiar to those looking after auto-enrolment. What they might not have been aware of when they enrolled in NEST is the RIBA Pension Solution which provides better support, a great choice on where members place their money – including ESG funds – and has been delivering a favorable rate of return.

The good news is that whatever scheme architectural practices are running, switching over to the RIBA Pension Solution is as simple as signing a form and letting the team at the RIBA do the rest. And there is no financial penalty whatsoever for employers or their staff on transferring pension funds into the scheme.

The RIBA has partnered with Smart Pension to create a market-leading auto-enrolment pension scheme tailored for architects' practices and their employees.

For employers opting for the RIBA Pension Solution, running a scheme could not be simpler.

But you don’t just take our word for it. Stuart Stroud, managing director of Corpad Employee Benefits, an independent pension adviser which advises the RIBA and its staff on pensions, has evaluated the two pension schemes to see how they fare.

Smart Pension was established in 2014 and supported by global financial investors including Barclays, JP Morgan and Legal & General. The National Employment Savings Trust – or NEST – was funded by the government in 2011 ready for auto-enrolment. Both are authorised and supervised by the Pensions Regulator.

From his extensive experience of working with both providers Stuart Stroud’s view is that:

• RIBA’s Pension Solution (Smart Pension) has a lower overall investment charge for members compared to that of NEST. NEST’s charges (the amount paid each year by members) are set at 0.30% of the individuals fund per annum (known as annual management charge) plus a 1.8% contribution charge taken from the individuals pension plan, this equates to a 0.48% charge overall. As contributions increase due to the percentage of rising salary levels, this means that the contribution charge the member pays and the impact of it, increases too. For the RIBA Pension Solution, Smart Pension charges are set at 0.25% of the fund per annum (known as annual management charge) plus a £1.25 per month member charge which is a fixed fee, so reduces the impact on the members account as their fund grow.
• The RIBA’s Pension Solution (Smart Pension) is noted for its stance on ethical and green investment and provides members with greater choice of where they want their money to be invested, compared with NEST, which has more limited investment options. The RIBA’s pension scheme’s default option has 71% of funds adhering to good environmental, social, and governance (ESG) criteria, which is one of the highest offerings on the market. Those enrolled in the scheme can choose to remain in the default fund or select from 17 alternative funds including ethical, Shariah and ESG funds.
• The RIBA’s Pension Solution (Smart Pension) is easy for employer to administer. When operating a pension scheme with NEST, the workload for clients is increased and more onerous, with less dedicated support.
• The RIBA’s Pension Solution (Smart Pension) provides more proactive communications with members. NEST member support is provided by online service, there is no member app or, live chat. Smart Pension support and additional options are available through the member app ‘pension in your pocket’ online service. Smart has partnered with Siri (Amazon) so an individual can link their pension plan to their account and request a fund value at any time through their smart speaker/tech. Smart Rewards, which provides discounted shopping are complimentary as a Smart Pension member.
• The RIBA Pension Solution provides access to guided service and a flexible retirement solution on retirement, should members prefer to draw down an income rather than buy an annuity. NEST on the other hand, is geared towards annuity purchase at retirement which means that the member needs to transfer out to access pension freedom/flexible retirement options.

Investment table

Past investment performance figures of the NEST and Smart Pension default investment funds is outlined below (though Stroud makes the obvious point that past investment performance is no guide to future investment performance and should be viewed in this way). 

Fund	3 months	6 months	1 year	3 years
Nest 2040 Retirement fund	0.7%	0.3%	-8.0%	11.9%
Smart Sustainable Growth Fund	0.8%	2.1%	-6.0%	8.6%

^{Past investment performance figures provided by Trustnet 09.01.2023}

Amanda Winslade, RIBA’s business manager says: “RIBA Pension Solution is so simple for practices to administer. If you have an online account, you upload your monthly information, as you would do with a NEST Pension. But with ours, you just get that extra support. So if you ever have a problem, you can just speak to the team at the RIBA and we will sort it out.”

There is also plenty of communication with new members joining the scheme, including ‘welcome emails’ with account details and where to go to get help.

“Members who are currently enrolled in NEST would have had very limited information as an employee. When their employer joins our scheme, they get sent all kinds of information about managing their account and then emails throughout the year.

“We understand that architectural practices run tight ships and rarely have time to run a pension scheme. Our offer makes it as easy – and of course as beneficial­ to them and their staff as possible.”

So why not review your current pension provision and see how it compares with RIBA Pension Solutions? We are confident you’ll be impressed with what you find.

You can get in touch with us and whatever pension problems you’re facing, it’s worth giving the RIBA team a call and seeing what Smart Pension may have to offer. Find out more about the RIBA Pension Solution by contacting the team at ribapension@riba.org or (0)20 7307 3737.