Thousands of savers approaching retirement in September saw devastating falls in their fund value in the year to state pension age or their stated retirement age, with the average at-retirement default down 9.08 per cent in the year to 30.9.22, after a typical 0.5 per cent charge.
The fall, for strategies serving savers one day from state pension age (SPA), means a £100,000 pot would have lost £9,080. Older savers suffered bigger falls on average than defaults serving younger savers, which fell 8.58 per cent after charges.
The figures come as The Pensions Regulator warns trustees to ensure strategies employed in DC schemes reflect the intentions of members with regard to withdrawal.
There was a big difference in performance between the best and worst performers – Creative Pension Trust’s strategy of targeting a secure near-cash return saw it return 0.68 per cent before charges, being 0.18 per cent after charges. Aegon’s BlackRock Lifepath Flexi default fell by 16.19 per cent before charges, 16.69 per cent after charges, for the older saver cohort, the biggest faller in the sector. This reflects its more aggressive investment approach, which has suffered in the volatile markets of the last year. However, it is worth noting that the same fund delivered 30.7 per cent to younger savers over 5 years, whereas the Creative default delivered 14.1 per cent.
Several funds saw higher losses for their supposedly less-risky pre-retirement default strategy than the strategy they use for younger savers, as a result of the extraordinary movements in the gilt market.
Default funds typically move to less risky assets as the member approaches their target retirement date. Gilts and bonds have been perceived as a safe haven investments until now. However, this year, as interest rates have risen and the UK cost of borrowing has soared, these assets have fallen in value, resulting in savers approaching retirement faring worse than those decades from retirement for some providers. National Pension Trust saw the biggest gap between the outcomes of younger savers and those 1 day from state pension age, with a difference of -8.76 per cent.
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| HOW DERISKING HAS FAILED TO PROTECT SAVERS
Provider |
12m return younger saver | 12m return pre
Retirement saver |
Difference pre/young saver | |
| National Pension Trust | -2.38% | -11.14% | -8.76% | |
| Fidelity FutureWise | -5.90% | -12.90% | -7.00% | |
| Aon Managed Core Retirement Pathways | -3.70% | -10.60% | -6.90% | |
| Cushon | -8.32% | -14.28% | -5.96% | |
| Crystal Trust Lifestyle | -5.50% | -11.10% | -5.60% | |
| Royal London Balanced Lifestyle Strategy (Drawdown)(GPP) | -1.71% | -6.77% | -5.06% | |
| Aegon BlackRock LifePath Flexi (BLK)(Master Trust) | -11.18% | -16.19% | -5.01% | |
| Aegon ARC | -6.89% | -11.60% | -4.71% | |
| Standard Life Sustainable Multi Asset Universal SLP | -8.70% | -12.75% | -4.05% | |
| Aviva MT & GPP My Future Universal Strategy | -5.31% | -9.32% | -4.01% | |
| SEI Flexi Default | 0.20% | -2.90% | -3.10% | |
| Scottish Widows PIA Balanced (Targeting Flexible Access) | -10.44% | -11.31% | -0.87% | |
| Nest | -7.31% | -8.11% | -0.80% | |
| Options | -9.23% | -9.59% | -0.36% | |
| Cheviot Trust | -11.00% | -11.10% | -0.10% | |
| The People’s Pension | -11.68% | -11.71% | -0.03% | |
| LGIM MAF | -10.96% | -10.96% | 0.00% | |
| LGIM Master Trust (TDF) | -9.49% | -9.33% | 0.16% | |
| LifeSight | -9.51% | -8.77% | 0.74% | |
| Mercer Master Trust | -9.50% | -6.11% | 3.39% | |
| TPT Retirement Solutions | -9.33% | -5.50% | 3.83% | |
| The Lewis Workplace Pension Trust | -3.59% | 0.47% | 4.06% | |
| Workers Pension Trust | -5.40% | 0.10% | 5.50% | |
| Hargreaves Lansdown BlackRock Consensus 85 5-year lifestyle to cash | -7.67% | 0.20% | 7.87% | |
| Creative Pension Trust Strategic Pensions Investment Approach | -11.82% | 0.68% | 12.50% | |
| Now: Pensions | -19.20% | -3.50% | 15.70% | |
| Corporate Adviser Pensions Average (CAPA) | -8.08% | -8.58% | -0.51% | |
There was a massive difference in returns of almost 20 per cent between the worst and best performers, for strategies serving younger savers, with some savers seeing their pots cut by a fifth in the year to Q3, 2022.
The average return for younger savers was -8.58% over the period, assuming a typical annual management charge of 0.5%.
As a result, on average, a pot worth £10,000 on 30.9.21 suffered a loss of £858 over the following year, making it worth £9,142.
But there was a huge range in the outcomes between different providers, with the best return, from SEI’s Flexi Default, which returned -0.3%, while the worst performer, Now: Pensions, returned -19.7%.
This means a £10,000 pot with SEI Flexi Default fell in value by £30 to £9,970, while a pot of the same size managed by Now: Pensions lost £1,970 in value, falling to £8,030, £1,940 less.
There was also a massive difference in 5-year returns between the best and worst performers, with some savers growing their pot by over 58 per cent, while others saw just a 10 per cent increase from investment returns.
National Pension Trust’s investment strategy delivered its younger members a return of 58.8% in the five years to 30.9.22, meaning a £10,000 pot would grow to £15,860. Now: Pensions’ strategy delivered just 10.5% over five years, a real-terms loss, meaning a £10,000 pot grew to just £10,150 over the period.
| YOUNG SAVER – 30 YEARS TO STATE PENSION AGE: 12 month return
Provider |
Return before charges 12 m to 30.9.22 | Return after typical 0.5% charge to 30.9.22 | |
| SEI Flexi Default | 0.20% | -0.30% | |
| Royal London Balanced Lifestyle Strategy (Drawdown)(GPP) | -1.71% | -2.21% | |
| National Pension Trust | -2.38% | -2.88% | |
| The Lewis Workplace Pension Trust | -3.59% | -4.09% | |
| Aon Managed Core Retirement Pathways | -3.70% | -4.20% | |
| Aviva MT & GPP My Future Universal Strategy | -5.31% | -5.81% | |
| Workers Pension Trust | -5.40% | -5.90% | |
| Crystal Trust Lifestyle | -5.50% | -6.00% | |
| Fidelity FutureWise | -5.90% | -6.40% | |
| Aegon ARC | -6.89% | -7.39% | |
| Nest | -7.31% | -7.81% | |
| Hargreaves Lansdown BlackRock Consensus 85 5-year lifestyle to cash | -7.67% | -8.17% | |
| Cushon | -8.32% | -8.82% | |
| Standard Life Sustainable Multi Asset Universal SLP | -8.70% | -9.20% | |
| Options | -9.23% | -9.73% | |
| TPT Retirement Solutions | -9.33% | -9.83% | |
| LGIM Master Trust (TDF) | -9.49% | -9.99% | |
| Mercer Master Trust | -9.50% | -10.00% | |
| LifeSight | -9.51% | -10.01% | |
| Scottish Widows PIA Balanced (Targeting Flexible Access) | -10.44% | -10.94% | |
| LGIM MAF | -10.96% | -11.46% | |
| Cheviot Trust | -11.00% | -11.50% | |
| Aegon BlackRock LifePath Flexi (BLK)(Master Trust) | -11.18% | -11.68% | |
| The People’s Pension | -11.68% | -12.18% | |
| Creative Pension Trust Strategic Pensions Investment Approach | -11.82% | -12.32% | |
| Now: Pensions | -19.20% | -19.70% | |
| Corporate Adviser Pensions Average (CAPA) | -8.08% | -8.58% | |
