Zurich, Willis Towers Watson and Scottish Widows have the best performing workplace default funds, while Now: Pensions has the worst returns, research has revealed.
Analysis published today (25 April) by Defaqto compared strategies and performance to help advisers identify 'value for money'.
Willis Towers Watson Drawdown Focused Medium Risk fund was found to have the best annual return up to September 2017, of 15.9 per cent.
Zurich's Passive Multi Asset V fund returned 15.8 per cent on a one-year basis, while Scottish Widows Pension Portfolio Two had an annual return of 13.9 per cent.
Both funds will soon be under the same provider, since Lloyds announced in October the acquisition of Zurich's UK workplace pension arm, along with assets under administration of more than £15bn and 500,000 customers.
Provider | 1 Year (%) | 2 Years (%) | 3 Years (%) | 5 Years (%) |
Aegon | 11.6 | 16.5 | 11.6 |
|
Aviva | 11.8 | 16.1 | 10.7 | 8.3 |
The People's Pension | 10.8 | 15 | 9.9 |
|
Fidelity | 7.7 | 11.6 |
|
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Friends Life | 9.8 | 16.7 | 11.5 |
|
LGIM | 9.2 | 16.5 | 10.8 | 9.6 |
Nest | 11.2 | 15.7 | 11 | 10.9 |
Now: Pensions | 6.1 | 7 | 3.1 |
|
OPT Pensions | 9.7 |
|
|
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Prudential | 11.1 | 17.5 |
|
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Royal London | 10.7 | 13.4 | 9.3 | 10.3 |
Scottish Widows | 13.9 | 20.2 | 11.8 | 11.9 |
Standard Life | 7.9 | 9.3 | 6.6 | 7.5 |
Willis Towers Watson | 15.9 |
|
|
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Zurich | 15.8 | 21.8 |
|
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On the other side of the spectrum was Now: Pensions, with its Diversified Growth fund having an annual return of 6.1 per cent.
Considering a three-year basis, the numbers are even worse, at 3.1 per cent.
Nevertheless, the provider has the lowest cost structure among all workplace pension providers analysed in the report.
The provider withdrew itself from The Pensions Regulator's master trust assurance list in 2017, and was fined £70,000 by the watchdog in February, with both matters relating to problems with its administration systems.
According to Rob Booth, director of investment and product development at Now: Pensions, the returns quoted are out of date since they are more than six-months-old.
He said: "Since the beginning of 2017 alone, the fund has produced returns in excess of 10 per cent, which would put it at the top of the tables."
The fund, launched in 2012, has delivered a total return of more than 47 per cent up to 20 April 2018, he argued.
He said: "Pension fund performance has to be looked at over the long term and we are confident that the Now: Pensions Diversified Growth fund will provide our members with strong risk adjusted returns.
"We adopt a balanced risk approach to investing which involves a much higher degree of diversification than more mundane equity dominated investment styles."
Nest, the largest master trust in the market with six million members, had an annual return on its 2040 Retirement Date fund of 11.2 per cent.
Over five years against the Consumer Price index (CPI) plus 3 per cent benchmark, the provider has the best risk-adjusted performance, with Royal London close behind, Defaqto reported.
Mark Fawcett, chief investment officer at Nest, said: "These findings are testament to the hard work we have put in for members since the beginning.
"It is great to see that Nest's numbers are still holding up strongly within the industry."
According to Nathan Long, senior pension analyst at Hargreaves Lansdown, many default funds were set up only after auto-enrolment was already up and running, meaning many of the funds entrusted to help people save for the future do not have particularly long track records.
He said: "The funds that have performed best tend to have a higher exposure to global stock markets, whereas those that have underperformed are actually designed to hold up better in falling stock markets.
