Bestinvest: £31bn of pension money in ‘dog funds’

The Bestinvest Spot the Dog Pension Edition report has identified 113 “serial underachiever” funds, which hold a total of £31bn pension money.

Focusing on funds with more than £2.5m in assets, the funds’ ability to beat their benchmark was examined over three consecutive 12-month periods.

Phoenix and Friends Life were among the two pension fund providers with the most dog funds, with 15 and 17 underperforming respectively.

Quite a few funds operating within an external arrangement were also found to have underperformed, such as the Legal & General BlackRock UK Dynamic fund and the Aviva Investec America fund.

Bestinvest business development and communications managing director Jason Hollands is not surprised and feels a lot of this underperformance could be down to the legacy nature of these funds.

Hollands says: “Sadly we were not surprised to find so many poor performing pension funds and those listed in spot the dog pensions edition are merely the tip of the iceberg.

“Pension fund performance gets far less scrutiny than the unit trust and OEIC world. In fact many people have simply  lost track of a pension, let alone understand how their plans are performing. Inertia is compounded by the mind blowing technical jargon that surrounds pensions.

“Pensions transfers are however a minefield, as there can be steep penalties or loss of benefits so you shouldn’t automatically switch. It therefore makes sense for people to take professional advice before making a switch.”