Auto-enrolment default funds still underperforming, according to latest report
A new report shows that the performance of pension default funds have delivered significantly worse returns for those in auto-enrolment than the wider market.
The report has been produced by Corporate Adviser Intelligence. They studied the default funds of the 'master trusts' used by many employers. Master trusts allow the assets of many employers to be pooled together so as to get the cost-benefits of scale. However, some schemes have struggled to keep pace with inflation over the past three years. The full details are available in this article in the Daily Telegraph - Telegraph Money.
This further confirms the research that was carried out last year by two separate organisations. As we reported in our article back in October 2017, these two surveys showed that millions of people in workplace pensions were not getting the best deal from their default funds. They also found that there was a big difference between the best and worst performing default funds.
The Department for Work and Pensions carried out an auto-enrolment review earlier this year and looked at many of the key issues facing workplace pensions. However, it did not really go into the important issue of the adequacy and suitability of the investments underpinning the schemes.
As the majority of members remain invested in their scheme's default fund, either through inertia or choice, it emphasises why the investment strategy and structure of the default fund is crucial. It is also why SMEs should look to review regularly the investment choices they offer and the make-up of their default fund, to ensure that they are meeting the needs of its members.
If you are looking to review your auto-enrolment scheme - and in particular the investment strategies behind the pension scheme itself - contact Kellands Corporate today.