Those in default pension funds could be missing out on returns equating to around £500,000 for a lifetime
Be warned if you’ve opted to stay in your default pension fund – research out today by JLT Employee Benefits has found that you could be missing out on returns by six per cent.
Over the last three years, the performance of the top ten defined contribution (DC) pension default funds has been between roughly 3.5 per cent and 9.5 per cent per annum, which JLT Employee Benefits warns could mean those on the lowest performing funds are missing out on around £500,000 over the course of a lifetime.
“Losing out on a six per cent return per year could have a huge, irreversible repercussion on members’ financial position at retirement,” said Maria Nazarova-Doyle, head of DC investment consulting at JLT Employee Benefits. “For example, a person in their thirties saving eight per cent of their £30,000 salary in a DC pension could end up with about £185,000 at retirement instead of about £715,000. This can dramatically change a pensioner’s life-style.”
And Mark Pemberthy, director, JLT Employee Benefits, added: “Our research is a powerful reminder that investment returns are a vital factor in delivering good DC outcomes. Investment capability is a significant differentiator between pension schemes therefore our findings emphasise the importance of selecting a pension scheme provider based on overall value for money and not just cost or convenience, and having a robust governance framework to identify any changes in expected performance.”