Big pension names felled by newer rivals

Pension funds run by Standard Life and Zurich are the weakest performers in the study, which looked at how the funds industry’s newest UK customers are being served. They have been left in the shade by surging equity and UK gilt markets, and smart asset-allocation calls at newer rivals.

UK law has required workers to be automatically enrolled in a workplace pension plan since 2012 and most new savers have been enrolled into Master Trust pension schemes, which serve multiple companies.

FN looked at the three-year performance to June 30 of the trusts’ default funds, at 15 leading schemes, comprising £9 billion of assets and over seven million savers.

BlackRock and Fidelity declined to provide performance figures because their Master Trusts both changed investment strategy in 2015. SEI Investments declined to provide any information.

Top performer Now Pensions is a £270 million scheme whose fund is run by an investment team at the Danish state pension fund ATP – its default fund over three years returned almost twice bottom-placed Zurich.

Second-placed Nest is the public scheme set up by the government to underpin the market and third-placed Cheviot Trust is a non-profit based in Southend, originally set up to provide pensions for lawyers.

A spokesman for Zurich, whose Mixed Investment default fund is run by Johanna Kyrklund’s multi-asset team at Schroders, said the fund was a “long-term investment” and added: “There will clearly be some shorter time periods where investment conditions favour one solution over the other.”

He added that Zurich also offers a passively managed alternative, which is just short of a three-year performance record, having launched in December 2013. Since then it has made 8.25% a year annualised, he added.

In a video update to members at Zurich’s website, Kyrklund said the Mixed Investment fund had reduced risk during 2015 by selling equities, and was now looking at buying opportunities that would “help us to deliver attractive returns this year”. She concluded: “Remember it is the tortoise and not the hare that wins the race.”

A spokeswoman for Standard Life’s £1.2 billion Master Trust said its default fund had a “very broadly diversified asset allocation” in order to smooth returns, and added: “This means that during shorter term periods, where one or two asset classes do particularly well, the solution may lag others.”

At Now Pensions, Rob Booth, director of investment and product development, said the scheme’s returns had been given a one-off boost thanks to a corporate restructuring; the scheme sold its 50% interest in its management company to ATP in 2013 and proceeds from this sale were reinvested in the fund. But ATP’s fund managers have also beaten their targets, he added.

Mark Fawcett, the chief investment officer at Nest, said returns were helped by a profitable exit from surging UK gilts in 2016.

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