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.”
The British Medical Association (BMA) has warned chancellor Philip Hammond to reform the NHS pension scheme rules or doctors will reduce their working hours.
The lifetime allowance should be scrapped and replaced with a lower annual allowance, last week's Pensions Buzz respondents said.
Action for Children Pension Fund has outsourced its pensions administration to Trafalgar House.