Switching from a pension default fund could cost ‘DIY’ investors up to £247,000.

Our new research with State Street Global Advisors shows that DIY investors risk missing out on up to £247,000 by switching from their workplace pension scheme’s default investment strategy and making their own fund choices instead.

Workplace defaults: better member outcomes reveals the potential cost of 4 of the most common mistakes made by pension savers who choose to be their own investment manager rather than investing in a default fund.

It shows how different savers, who display particular behavioural biases, perform over 4 decades, compared to someone who stays invested in a well-run default fund throughout.

The saver profiles include:

  • Cautious Connor – doesn’t like taking risks so invests in a cash fund
  • Performance chasing Patricia – buys high into a strongly performing fund
  • Eggs in one basket Elliot – fails to diversify his portfolio
  • Forgetful Fiona – is initially an active investor but fails to keep her portfolio under review

The report also focuses on the lack of knowledge around charges paid on pension pots, with almost 8 in 10 (78%) of savers unaware that a fee is taken from their pot1.

Download our ‘Workplace defaults: better member outcomes’ report

1 Source: The FCA Financial Lives Survey found that 78% of defined contribution savers were not aware of charges on their pension.