The average pot size for members who actively select funds is £29,996 compared to just £3,790 for a defaulter, according to a study by Hargreaves Lansdown.
The poll, which involved the top 10 fund choices made in over 300 pension schemes covering 80,000 members as of June 2017, also showed choosers outperformed defaulters by an average of 4.6% over one year, 5.6% over three years and almost 5% over five years.
It further demonstrated over a 40-year working life, a member earning £28,000 and paying in 10% contributions can expect a pot of £447,000 when they achieve a 6% return after charges, as opposed to £347,000 for someone who only achieves 5% returns.
Of the fund choosers, the average age of a defaulter was 38, compared to 40 for a chooser. A quarter of men were more likely to make investment choices compared to 15% of women, and the length of membership was 3.5 years for choosers, compared to 2.8 years for defaulters.
Hargreaves Lansdown senior pension analyst Nathan Long said: "Those choosing their own pension investments tend to be a little older and male, but this need not be the case. A great starting point when trying to improve the returns from pension investments is to understand where [the member's] workplace pension is currently invested."
The analysis stated outperformance could be attributed to two factors. The first is that choosers tend to take on more risk, with only one of the top 10 funds representing a lower risk option than the average default fund.
The second is that all of the top 10 funds of choosers were actively managed, allowing the scope to deliver improved returns over time. Whereas, default funds are more likely to include passive investment strategies to fit within the 0.75% charge cap, which self-select funds are not subject to.
The report further suggested that the more engaged members are with their pension, the bigger it gets.
When people newly enrolled go in to the default fund, it takes time to build knowledge and confidence to make investment choices.
Long said the two key ways to boost member's retirement post is to pay more in and to improve investment returns, as while paying in more is easier to understand, it ultimately costs more.
He said: "With pay packets becoming further stretched as wages fail to keep pace with inflation, taking the time to understand where your pension is invested is time well spent. Default funds are designed to be conservatively managed, they are one-size-fits-all, but that will not suit everyone.
"The stock market has historically given the largest returns over time, but it also tends to suffer the biggest falls in times of adversity.
"Most people will be investing in a pension for over 40 years. Such long time periods lend themselves to investing in riskier investments as any fluctuations in value can easily be ridden out. At the very least, a closer look at where you are invested will help [the member] understand what proportion of their savings is in the stock market, and how this is split between the UK and overseas."
More than half of BlackRock’s flagship UK defined contribution (DC) default fund’s assets will be invested in ESG strategies by June 2021.
Graeme Bold says the right communications can improve both the level of savings and the outcomes for savers.
More than half of UK savers agree they are unable to save sufficiently to achieve the retirement they want, according to research by BlackRock.
Pension savers have held off from making changes to their pensions despite nearly half having been impacted by the pandemic, research finds.