Persistent Poor Pension Performance Blasted


Poor performing pension funds holding more than £30 billion of retirement saver cash are named and shamed in a new report.

Around 110 funds with cash and assets of more than £2.5 million each are accused of failing their investors by underperforming against the stock market by at least 10% for the past three years running.

Another 40 funds are blasted in the report for falling short of stock market performance by at least 20% for the past 10 years.

The worst two pension firms with the moist poor-performing funds were shown to be Friends Life and Phoenix by the study, published by Bestinvest, a financial services broker. Other big names in for criticism on the list include Scottish Widows and Prudential.

Axa Wealth and Skandia do not escape attention because although they do not own or sell any of the funds on the list, they do manage some of them.

Poor returns

The funds identified by the survey are mostly ‘legacy funds’ closed to new savers sold by life insurance firms.

David Smith of Bestinvest wants savers to switch their cash to better-performing investments.

“Most ordinary people and do not understand their pensions and investments or how they work,” he said. “In a lot of cases, a pension is started with the best intentions, then gets forgotten and moves into the hands of different fund managers as firms merge or take each other over.

“We feel fund performance is important, because the difference between the best and the worst can mean having extra money in retirement.”

The study looked at thousands of pension schemes to analyse performance against published fund benchmarks. A pension is labelled poor if returns have dropped significantly below the benchmark – at least 10% each year for the past three years.

Worst funds

According to the study, the worst funds were Axa Wealth’s Investec American fund and the Skandia’s Investec American fund. Their benchmark was the Standard & Poor’s 500. Both sunk at least 25% behind the benchmark.

Other funds that failed to inspire included managed funds Scottish Equitable JPM Cautious Total Return Mixed fund, and the Legal & General Multi Manager Balanced fund.

The firm also warned that pension funds with assets of less that £2.5 million were also failing many of their investors.

“People are living longer and need more cash in retirement so have to make their money work for them,” said a spokesman. “These funds are just not doing the job.”