Worst pension funds revealed

Funds and Investment Trusts October 21, 2013 by Holly Black

Savers have £31 billion invested in underachieving pension funds, according to a new pensions Spot the Dog report by Bestinvest.

The broker, which regularly names and shames the worst-performing retail funds, has turned its attention to pensions and found 113 funds that aren’t making the grade.

To be classed as an underperformer each fund must have failed to beat its benchmark over three consecutive 12-months periods, and underperformed by more than 10 per cent over three years. 

Some 40 funds have also been branded ‘long-term laggards’, having underperformed their sector average by more than 20 per cent over the past decade.

Within this list, both Friends Life and Phoenix have eight funds listed, Windsor has seven, and Abbey Life five. The worst performer in terms of capital return is the Phoenix NPI Distribution Stk Series 2, which has underperformed by 47 percent, with an actual loss after 10 years of more than 8 per cent of the original capital invested.

However, it should be pointed out that Phoenix is one of several consolidator firms, which have acquired assets from former providers and are closed to new business.

Bestinvest adds that those named in its report are ‘the worst of the worst,’ and the list ‘merely represents the tip of the iceberg’. David Smith, wealth management director at Bestinvest, says many savers are suffering due to inertia, with plans rarely reviewed and even forgotten about.

‘The performance of your pension funds really does matters, as the price of tolerating poor performance will quite literally be a worse-off lifestyle in your retirement,’ he adds. ‘[This report] is a wake-up call: your pensions are too important to ignore and you do not have to put up with dire performance.’

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