Defined Contribution  

Best and worst pension default funds named

Best and worst pension default funds named

Zurich has emerged as the best performing default fund in accumulation while Legal & General came out top in the at-retirement category in analysis conducted in March.

Analysis from Punter Southall Aspire of the growth and consolidation phases of nine default funds in the defined contribution market found discrepancies among providers, with Standard Life ranking last on accumulation and at retirement.

In the accumulation phase – normally designed with significant exposure to equities to maximise growth - the Zurich Passive Multi-Asset (V and IV) was the best performer over the last three years with returns of 11.3 per cent, although on a relatively higher level of risk (8.4 per cent) compared to the other defaults.

The fund is now administered by Scottish Widows after it took over the workplace pensions business from Zurich last year.

On the other end of the table sat Standard Life’s Stan Life Active Plus III, which produced the worst return (5.4 per cent), but does exhibit a consistently lower level of risk (5.2 per cent) than all the other funds analysed, the report stated.

A spokesperson for Standard Life said: "Our focus is on the long term and ensuring that Active Plus III is likely to deliver the returns members need, at a level of risk that members are willing and able to make, that helps them to meet their target as consistently as possible.

"We believe that the fund has done this in the longer term and, through ongoing monitoring and review, we are ensuring it continues to do so in an ever changing environment."

When approaching decumulation – five years before retirement - the Legal & General multi-asset fund was the best performer (9.1 per cent), although at a relatively high level of risk (6.5 per cent) compared to the other defaults.

Standard Life was again the worst performer, this time with its Universal Strategic Lifestyle Prolife fund, which produced the worst return (5 per cent) relative to the risk taken (4.7 per cent).

Looking at the 'at retirement' portfolios, Legal & General’s MAF –  which has taken the decision to not implement a risk reducing strategy as members’ approach retirement – is again the best performer.

According to Christos Bakas, DC investment consultant at Punter Southall Aspire, there was increased volatility in global asset markets this year, which meant returns were harder to achieve.

He said: “We urge employers to monitor the performance of their pension funds more closely, as default doesn’t mean standard, and not all funds are created equally.

“Employers need to keep on top of their funds and regularly check their performance; otherwise they may be putting their employees’ pension pots at risk.”

27 August 2019: This article has been amended post publication to reflect that Royal London was not the worst performer in the at-retirement category as previously stated. This was after Punter Southall Aspire corrected an error in its original data reading.

maria.espadinha@ft.com

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