The majority of pensions have underperformed the index by well over 10%, with over a third dropping short by over 20%
Nine out of ten UK pension funds get worse returns than a simple tracker following the FTSE All-Share index, according to a new research.
Analysis from AJ Bell found that 91% of UK pension funds have underperformed the returns of a FTSE all-share tracker, which mimics the performance of London’s 600-company index.
The majority of pensions have underperformed the index by well over 10%, with over a third dropping short by over 20%.
The iShares UK Equity Index, which tracks the FTSE All-Share, has produced total returns of 73.7% including reinvested dividends and after accounting for annual charges, over the past 10 years. On the other hand, some pension funds have returns of below 50% in that time period, with the lowest being the Standard Life/Invesco Perp High Income 4 Pen fund at just 13%.
The pension funds fare better if compared to the FTSE 100, which has seen much slower returns over the last 10 years. Nonetheless, they look even worse when compared to Wall Street’s S&P 500, which has posted returns of well more than 200%.
The research comes amid questions of whether pension funds should invest more money in London-listed businesses and British growth companies. According to figures from the ONS last December, just 4.2% of listed UK shares are owned by pension and insurance funds— the lowest proportion on record.
Laith Khalaf, head of investment analysis at AJ Bell, says: It is pretty shocking that nine out of ten pension funds investing in the UK have not beaten a simple tracker fund over the past ten years. The magnitude of some of the underperformance is equally concerning. Nearly three quarters of these funds underperformed by 10% or more, and more than a third underperformed by 20% or more.