Default investment strategies lost nearly a quarter of their value during 2008 with an average return of -23%, an exclusive PensionsDCisions poll reveals.
The firm's 2009 PensionDCisions Sponsor Default Investment Strategy Survey - in association with Professional Pensions - found annual returns over three years were also negative, with an average of -3%, however, over five years average annual returns were positive at 4%.
The data analytics firm's third annual survey found on average, 81% of members invest in the default option. For plans that participated in both the 2008 and 2009 surveys, the default rate increased on average by almost 2 percentage points.
Of the 45 DC pension plans polled less than 10% had changed their default investment strategy since the first survey in 2007.
However, 20% stated they were considering changing their default strategy because of the current market environment.
With one exception, all the plans considering a change currently used passive equity tracker funds combined with life-cycling.
Mercer principal Brian Henderson told PP: "We all realise defaults have inadequacies. They are there to try to provide something to members that really do not understand, do not want to understand their investment choices or are not fully capable of making investment choices. You could argue these members do not know what their objective is."
PensionDCisions managing director Graham Mannion added: "Sponsors and providers are signalling clearly that DC plan design is in need of improvement. The industry at large is working to understand, engage and enable members appropriately and the reason is simple, it makes commercial sense."