UK default pensions funds poor – Now: Pensions
Standard bonds and equity allocation not working for retirement savings, chief executive argues
Default funds for UK pension savers are not fit for purpose, according to one pensions expert.
Morten Nilsson, chief executive of Now: Pensions, said no one trusts the pensions industry in Britain and default funds are letting down savers.
He referred to data from the Organisation for Economic Co-Operation and Development (OECD) Pensions Outlook 2012, which showed UK pension funds made a loss in real terms of 0.1% from 2001 to 2010 and 1.1% from 2007 to 2010.
Nilsson argued that this is largely due to poorly performing default funds, saying the vast majority of people end up in them so they should be under closer scrutiny.
“There is nowhere in the world with more financial knowledge than here,” he said. “How can we not have better default funds?”
People using the default option need not be a bad thing, he said, but if the funds are poor this will be to the detriment of savers.
“About 90% of people in the UK end up in default funds,” Nilsson said. “People see that as a bad thing. We see that as a good thing if the fund is right.”
The typical structure of pension funds is the primary problem, he argued, and should be reassessed to generate a return.
“The cheapest way to offer a fund is [investing in] equities and bonds,” he said. “It doesn’t cost you anything to run a portfolio like that, but it is not good enough. That needs to change.”