Now Pensions has the worst performing default fund of any major defined contribution provider, according to a new report by product review company Defaqto.
The embattled mastertrust, which has more than 1m members, delivered annualised three-year returns of just 3.1 per cent in its diversified growth fund up to September last year.
It is the latest in a series of headaches for Now, which withdrew itself from the Pensions Regulator’s mastertrust assurance list in 2017, and was fined £70,000 by the watchdog in February, both in relation to problems with legacy administration systems.
The Defaqto report reveals members have also experienced sluggish returns. As well as delivering the lowest absolute return, the scheme’s default came last on two out of three risk-adjusted measures.
With a score of -0.95, only Standard Life’s Active Plus III fund had a worse risk-adjusted return as measured by an information ratio relative to the ABI Mixed Investment 40-85% Shares benchmark, below Now Pensions on -0.89.
Scottish Widows had the highest-returning default in absolute terms. On various risk-adjusted measures, Nest, Royal London, Friends Life and Legal & General Investment Management were consistently among the top performers.
Rob Booth, director of investment and product development at Now Pensions, said the fund’s performance had improved considerably since Defaqto’s September cut-off, with equity markets now looking less stable.
“We’re pleased that the Defaqto report acknowledges that our pricing structure is the lowest standard rate in the market. But, the returns quoted are out of date being over six months old,” he said, claiming that the fund has returned more than 10 per cent since the start of 2017.
“We adopt a balanced risk approach to investing which involves a much higher degree of diversification than more mundane equity dominated investment styles,” he added.
A spokesperson for Standard Life said: “When equity markets have performed very strongly, more concentrated strategies with relatively high levels of equity exposure will have done better. However, in other environments when equities don’t perform well, Active Plus III is more likely to outperform.”
