If you’ve been looking for an online pensions and investment platform, you’ve almost certainly seen Nutmeg pop up. But is it actually any good?
Nutmeg in a nutshell
Nutmeg came to market in 2012 as one of the first “robo-advisors”. It invested customers’ money in low-cost ETFs and used technology, rather than humans, to make investment decisions. This allowed it to offer lower fees than other providers and a simplified service to attract customers with less knowledge or time to make decisions.
The original idea was simple. If you were looking to open a private pension plan but didn’t have the money to pay for financial advice, Nutmeg made life easy. You completed a questionnaire to evaluate your risk appetite and based on that, the platform put you into one of its 10 portfolios. Fees were transparent and relatively low, and a “robot” adjusted your investment on an annual basis.
Since then, it has grown significantly and now boasts over 200,000 customers. In 2021 JP Morgan acquired the platform. Today, it offers pensions, Stocks and Shares ISAs and Lifetime ISAs, Junior ISAs, and general investment. It also offers a wider range of portfolios: Fixed Allocation, Fully Managed, Socially Responsible, and Smart Alpha.
These new portfolios include human intervention and thus also come with slightly higher fees. A pension portfolio of £20,000 and 0% returns in its Smart Alpha fund charges 1.15% in fees, compared with 0.69% for the same in its Fixed Allocation fund.
Getting started with a Nutmeg pension
The good thing about Nutmeg pensions are their simplicity. To open an account, you need to invest a minimum of £500, complete a questionnaire and choose your investment style, and then sit back while the platform does its work. This is where it differs from a SIPP (self-invested personal pension) which expects you to make more decisions on where to invest. Think of it as “do-it-for-me” rather than “do-it-yourself”.
The platform is easy to navigate and provides a good amount of information. Past performance is easy to find. So too can you see the asset and country allocation of the various portfolios. There are guides to investment styles and understanding financial jargon and tax implications. There are online and telephone options to contact the customer service team. Once your portfolio is up and running, the platform provides easy to track data to follow your investment performance.
Where Nutmeg stands out against other robo-advisors in the pension market are the other services. From as little as £100 initial investment, you can open an ISA account (a tax-free savings account up to £20,000). You can also open a Junior ISA to start saving for your kids. The general investment account allows you to continue investing beyond your tax-free allowance.
Are there better low cost pension providers?
Nutmeg pensions sound great in theory. You don’t need to invest too much to start. The fees are transparent and seem relatively low. All the hassle of choosing how and where to invest is taken off your hands. But start looking around at all the other reviews and you’ll start to see the problems. There’s a good reason Nutmeg gets a TrustPilot score of 3.7.
While that initial investment of £500 isn’t massive, it’s also not the best. With PensionBee, for example, there is no minimum investment requirement to open a pension. If you want a provider with ISAs too, Wealthify offers a pension with initial investments of £50 and ISAs from just £1.
The fees at Nutmeg also sound pretty reasonable at around the 1% mark. But again, PensionBee offers managed funds at 0.75%. Wealthify offers fees on its Fixed Allocation equivalent portfolios from 0.60%.
Performance over the last 5 years at Nutmeg also compares poorly with other platforms. Its highest risk level portfolio did better, gaining 23.30% against an industry average of 20.70%, but is beaten by rival MoneyFarm with 26.70%. But its low, medium and high risk portfolios all did worse compared to the industry average. With a pension investment requiring long term investment, returns are going to fluctuate. But with compound interest, a percentage point here and there could make a massive difference over time.
Finally, we know that many people are interested in ESG credentials so may be tempted by Nutmeg’s Socially Responsible funds. But if you are really interested in being socially responsible with your pension, do you want to invest in a platform owned by JP Morgan – one of the biggest global investors in fossil fuels?
Nutmeg pensions – probably not the best choice
Planning for your future retirement is a complex business and deserves time and consideration. We have written extensively about how difficult it can be to make the right choices when looking at pensions.
In our opinion there are better options out there than Nutmeg.
If you’re looking for a simple, low-cost pension plan take a look at our review of PensionBee. For a wider range of options, including ISAs, we have recently looked at Aviva. If you have a larger pot to invest, then a flat-fee platform like interactive investor may be better.
Author: Mike Davies
Disclaimer:
The Editorial Team at #DisruptionBanking have taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this Article. This Article is most definitely not Financial Advice.
