Fidelity urges firms to diversify DC defaults - EXCLUSIVE

The fund management firm said as many as 4.8 million DC members were invested in default funds – which it said did not diversify investments sufficiently.

And it said only wholesale change could prevent mass disappointment.

Fidelity executive director of DC business development Julian Webb said: "What most members of DC schemes needed going into this latest period of market volatility was pretty much the one thing they didn’t have: good diversification.

"It is likely that many of the people invested in default funds, which tend to be legacy funds, will be disappointed, angry or confused as they see their retirement pot battered by the credit crunch."

Webb added: "Human nature will continue propelling large numbers into default funds so the industry just has to make them better.

"The good news is that we are seeing an increasing number of companies change their default fund either to a tailored portfolio that includes a global diversified fund, or to a working life strategy that starts with global equities, moves to a global diversified fund then eventually to bonds and cash."

Fidelity launched a global diversified fund in May. It allocates around 35pc to equities, 10pc to bonds and 55pc to alternative assets such as property, infrastructure, commodities, cash-plus strategies and currency.