Sometimes what seems “low cost” ends up costing more than you think.
Over 13.8 million UK workers – almost half of the workforce – are saving into a pension scheme that charges them every time they contribute.
That scheme is Nest, the government-backed pension provider designed to make retirement saving accessible. But what most Nest members don’t realise is that they’re being quietly taxed twice: once by HMRC, and again by Nest itself.
Let’s break it down.
Nest levies a 1.8% “contribution charge” on every new pound paid in, whether it’s your own savings, your employer’s contributions, or tax relief from the government. This fee is on top of its 0.3% annual management charge. Why? Because Nest owes the UK government over £1.2bn – a taxpayer-funded loan taken out to set up the scheme over a decade ago.
Originally set to be repaid by 2032, Nest’s repayment timeline has now slipped to 2038. But even that looks optimistic. This year, Nest made its first payment towards the loan: a mere £6m. To hit the 2038 deadline, it would need to repay £92m annually, more than 15 times what it has just managed.
Who pays the price? The saver. Always the saver.
Take someone earning £50,000. They could face an extra £440 in pension contribution charges between 2032 and 2038. For someone earning £100,000, that figure rises to around £945 in just six years. Over the course of a full career, those charges can compound into thousands of pounds lost. That’s money that isn’t being invested, isn’t growing, and isn’t helping you retire on your own terms.
Pension saving is a long-term journey, but if you’re forced to pay a toll every time you get on the motorway, you’re not on equal footing with someone cruising toll-free.
So what’s the alternative?
Here’s the truth: you don’t have to pay these fees at all.
With Prosper’s personal pension (SIPP), you can take control of your retirement savings with zero platform fees, zero transaction, deposit, or transfer fees, and refunded fund fees on more than 30 top-tier ETFs from asset managers like BlackRock, Vanguard, and Fidelity.
Remember, we don’t pay interest on uninvested cash or balances in the Prosper Wallet. We do this unapologetically because it aligns our incentives with yours and it creates a revenue stream for Prosper. We want your money invested and growing, not sitting idle.
That means: 100% of your contribution is invested from day one. No 1.8% haircut.
You get access to globally diversified portfolios.
You don’t subsidise a £1.2bn government loan.
We’re not here to knock the intentions behind Nest. It’s done a lot of good in bringing pension access to millions. But good intentions don’t always make good outcomes. And if you’re someone who takes your long-term wealth seriously – especially if you earn above the UK average – it’s worth asking:
How much more could I have if I wasn’t paying to cover someone else’s debt?
This chart shows how your pension pot could grow with Prosper compared to Nest over 30 years, assuming your monthly contributions rise by 2.5% a year and investments grow at 8% per annum. The difference? £306,364 more with Prosper, just by removing fees. Fees eat into your returns over time.
Uninvested cash doesn’t earn interest.
Transparency shouldn’t be optional in pensions
The Nest model was built on a compromise. But as investors, especially those with growing portfolios and long time horizons, we shouldn’t compromise on clarity, cost-efficiency, or control. Every pound lost to unnecessary fees is a pound that could have been compounding for your future.
Want to see how your pension stacks up? Join Prosper today.
Capital at risk. Investments can go down as well as up.