Nine in ten pensions get worse returns than simple all-share tracker fund

6 comments

1. Well yes – they have much less aggressive risk profiles

2. Well shares have done well recently. A prudently managed pension scheme also has to think about making payments to current pensioners not just long term growth prospects. The risk-reward profile of their investments is different and of course they return less. A 30 year old can wait a decade to ride out a share crash but an 80 year old cannot!

3. Reminder to check what funds your pension is invested in and change it to a different fund if necessary. If you are 10+ years from retirement you should be 100% invested in a cheap global equity market tracker fund, or the closest your provider has. Total fees should be 0.5% pa or less.

   If you leave your pension in the default fund it will likely be too conservative (i.e have large bond and cash allocations) and be overweight on UK stocks.

   Everyone should read up on this stuff as it will literally save you £100ks over course of working life.

4. Bar a few examples this is just stating shares have outperformed bonds.

5. Most will be work-based pensions and will have employer contributions. They might under-perform, but for the employee, they will still represent good value for money.

6. Half the problem is likely overinvestment in the UK. Any growth investment should ignore the UK.