On the go: The pension savings of master trust members close to retirement are likely to have declined on average by 8.7 per cent during the first quarter of 2020, according to analysis from Isio.
On Wednesday, the newly formed consultancy published its Q1 defined contribution default review, which analysed the performance of eight master trusts’ default strategies.
The research showed that late-career members – those with two years until retirement – were better protected than younger members from market volatility over the period; their investments in defensive strategies with higher allocation to gilts have offered them downside protection.
According to Isio’s analysis, members at the start of their careers and who still have about 30 years until retirement have seen their pension savings fall between 13.2 and 20.8 per cent over the past three months.
These individuals are in the growth phase of the sample master trust default strategies, and therefore have a heavier exposure to equity-driven strategies, which were generally the worst hit by the recent market sell-off, the company stated.
According to Mark Powley, head of DC Investment at Isio, although younger members have been more affected by market volatility, for these individuals future contributions will be the main driver behind their pot size in the future.
“We would therefore encourage these investors to be patient and take more of a long-term approach to assessing success or failure in the growth phase.
“On the flipside, recent sell-offs have illustrated the need to diversify in the right way and dial down risk as members’ approach retirement. Getting this right has a massive impact on members’ retirement outcomes, and chasing returns could result in disaster.”
