Should you switch your pension fund?

Many pension fund options are poor performers, thanks partly to high charges. Is it worth the switch?

Pension fund with two piggybanks pink and white on blue background
(Image credit: Getty Images)

Britain’s pension funds are seriously underperforming, with savers receiving far less income in retirement as a result. Research from Stockbroker AJ Bell published in the summer showed that nine in 10 UK pension funds have failed to keep pace with funds that simply track the UK stock market, as measured by the FTSE All-Share index, over the past decade. Almost three-quarters have underperformed by more than 10% and more than a third are at least 20% behind. 

Well-known pension providers singled out for criticism include Clerical Medical, Phoenix, Scottish Widows and Standard Life. Even small differences in performance have a substantial impact over time, AJ Bell warns. A saver with a £50,000 pension fund would see their savings grow to £167,357 over the next 20 years if their fund returned 6% a year; if that return dropped to 4%, the final pot would be worth only £109,556.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.