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Defaqto launches guide to help advisers on default pension funds

The independent financial advice business Defaqto has today launched its 2019 guide to workplace pensions default funds.

The analysis reveals the key factors advisers should be aware of, understand and consider when reviewing default funds.

The guide serves as a resource to allow advisers to compare schemes and assess performance, as well as counting towards continuous professional development requirements.

The analysis identifies a number of key areas to consider when reviewing default funds including governance, cost and regulation.

All workplace pension providers known to Defaqto were asked to contribute to the study.

Factors tracked include the fund management structure and investment approach, asset classes available, performance, charges and the considerations given to ESG.

Defaqto says many workplace pension providers report that nine out of 10 savers remain in their pension default fund.

Therefore the guide aims to give a comprehensive overview to allow advisers to confidently recommend a scheme based upon factual evidence.

The Competition and Markets Authority underlines the role that advisers have to play in ensuring optimum retirement outcomes for people – having recently highlighted potential problems in the ways the investment consultant and fiduciary management markets worked.

Their report identified that pensions schemes could benefit from more diverse and impartial advice.

Defaqto head of insight and consulting David Cartwright says: “With some of these attributes, such as manager structure, investment approach and attitude to responsible investing, the choice of provider and fund might come down to the investment beliefs of the employer or their adviser.

“However, in terms of the other more objective features, such as risk-adjusted performance and charges, some providers and funds are clearly more competitive than others.

“Bearing in mind the diversification in providers and clients, and their respective needs and objectives, it is not surprising that no individual default fund outperforms its peers in every subject area considered.

“That said, it is notable that some default funds consistently compare well to their peers across most subject areas, and arguably these represent the greatest opportunity for advisers to evidence value for money and deliver good outcomes for clients.”



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