UK - A typical member in a defined contribution (DC) pension scheme could be missing out on as much as £3,600 a year, suggests new analysis.
Fidelity International said that as many as 90% of DC pension scheme members have chosen to invest their contributions in a default fund, but this meant they could be missing out on funds that have the potential to provide better investment growth and therefore a higher income in retirement.
The company said that an analysis of the performance of differently structured investment portfolios suggested that a 30 year old, who contributed £300 a month until age 65 into a balanced fund could obtain an annual income in retirement of £25,816.
However, investors who selected funds aimed at higher investment growth, such as a portfolio of 30% bonds and 70% equities could turn the same level of contributions into a retirement income of £29,421.
Julian Webb, executive director of DC business development at Fidelity International, said: “For those who have the appetite and capacity to take on more investment risk early in life, but fail to do so, poor fund selection could make the difference between an attractive retirement income and a disappointing one.”
Guy Opperman has rejected calls to speed up changes to auto-enrolment (AE) despite increasing pressure to boost contribution rates and overall savings pots.
Pensions and Benefits UK 2019 is delighted to announce the launch of our programme for this year, celebrating 20 years of bringing you the latest updates on all things pensions and employee benefits. Register for your place today!
PP has compiled a list of what to watch out for over the coming months.
Willis Towers Watson's LifeSight is the first master trust to be granted authorisation by The Pensions Regulator (TPR).