Exclusive research: Pensions Insight finds the industry split over the suitability of default funds and whether there should be one default fund, or many
Readers were exactly split over whether the scheme’s default fund will give members enough savings to provide a decent income in retirement (see right).
“This is quite an interesting one because what that’s saying is we think that the members’ attitudes and circumstances should be taken into account,” says Hargreaves Lansdown’s Laith Khalaf.
“But that can’t really be incorporated within a default fund because if you start having lots of default funds, you don’t have a default fund any more. What you have is a fund choice.”
Opinions also sharply differed on whether employers should offer more than one default fund.
“Some organisations lend themselves to having different default funds,” says Helen Ball of Sackers, who uses the example of a large company with a wide range of workers, who are likely to have different retirement needs and indeed retirement dates.
The bigger the organisation, the more chance there is that you would have different default funds
“The bigger the organisation, the more chance there is that you would have different default funds,” explains Ball.
Stephen Lefley, director, corporate distribution, for Zurich Corporate Savings, argues contribution levels are much more important than the default fund.
“[Insufficient contribution rates] are going to be the biggest undoing of this vast new population in DC,” he predicts.
“It’s up to us, actually, to be quite clever here and to get the best outcomes at retirement possible with them having very little engagement ever.”