Pension funds are delivering better returns than British savers expect, with average annual growth over five years nearing 8% for those 30 years from retirement.
PensionBee’s Pension Performance Benchmark analysis, which examined a number of leading pension providers, shows that savers could be underestimating the potential growth of their pensions, as a previous PensionBee survey found that over a third of savers – aged 18 to 54 – anticipate returns between 5% and 7%.
This analysis of pension fund performance – using industry data provided in Corporate Adviser’s Master Trusts and GPP Defaults Report – reveals that leading pension funds have delivered an average annual return of 7.72% over the past five years for those 30 years from retirement. This is notably higher than the 5% to 7% returns expected by over one-third (34%) of British savers – a figure matched by those aged 18 to 54 – according to PensionBee’s survey.
30 years from state pension age*
| Fund name ** | Annualised returns over five years |
|---|---|
| Aegon Workplace Default (ARC) & associated retirement years (GPP) | 7.28% |
| Aviva Master Trust & GPP - My Future Universal strategy | 10.03% |
| LGIM - Multi Asset Fund (GPP) | 5.28% |
| Nest 2040 Retirement Date Fund | 8.29% |
| Now: Pensions Diversified Growth Fund | 5.1% |
| PensionBee (LifePath 2055-2057 Fund) | 10.7% |
| Royal London - Balanced Lifestyle Strategy (Drawdown) (GPP) | 7.54% |
| Scottish Widows - PIA Balanced (Targeting Flexible Access) (MT & GPP) | 7.96% |
| The People’s Pension - Balanced Profile | 7.34% |
| Average | 7.72% |
* Data from Corporate Advisers Master Trust and GPP Defaults Report. Data up to 31.12.2023. PensionBee data supplied directly and data is up to 31.12.2023.
** MT = Master Trust. GPP = Group Personal Pension.
For savers nearing retirement, the picture is more moderate, with average returns of 5.27% over the same time period. This performance aligns more closely with public expectations, as the survey found 37% of those 55 and over, believe a realistic return is between 5% and 7%. The findings emphasise that while pension growth can be substantial over a longer time horizon, savers’ expectations are broadly in line with the actual performance of funds closer to retirement.
Five years from state pension age*
| Fund name** | Annualised returns over five years |
|---|---|
| Aegon Workplace Default (ARC) & associated retirement years (GPP) | 7.03% |
| Aviva Master Trust & GPP - My Future Universal strategy | 5.43% |
| LGIM - Multi Asset Fund (GPP) | 5.28% |
| Nest 2030 Retirement Date Fund | 5.78% |
| Now: Pensions | 3.3% |
| PensionBee (LifePath 2031-2033 Fund) | 6.2% |
| Royal London - Balanced Lifestyle Strategy (Drawdown) (GPP) | 4.23% |
| Scottish Widows - PIA Balanced (Targeting Flexible Access) (MT & GPP) | 5.25% |
| The People’s Pension - Balanced Profile | 4.96% |
| Average | 5.27% |
* Data from Corporate Advisers Master Trust and GPP Defaults Report. Data up to 31.12.2023. PensionBee data supplied directly and data is up to 31.12.2023.
** MT = Master Trust. GPP = Group Personal Pension.
The analysis assessed a variety of pension funds from leading providers, revealing a trend of stronger returns for those further away from retirement. The data suggests that a longer investment window allows for greater market exposure and stronger returns, compared to the more conservative strategies typically adopted as savers approach retirement age.
The five-year horizon data emphasises that while returns may be more conservative for those closer to drawing their pension, the strategies in place ensure that pension savings are protected as individuals approach retirement.
Clare Reilly, Chief Engagement Officer at PensionBee, commented: “These results demonstrate the importance of long-term planning and investment in pension funds. The average fund performance exceeding saver expectations shows that with a well-planned strategy, pensions can deliver strong returns over time.
“The findings underline the value of continued engagement with pension plans, as well as the importance of selecting a provider that offers flexibility in investment strategy based on individual timelines and risk profiles. We encourage savers to remain focused on their long-term goals and make the most of growth opportunities while they’re still accumulating savings in order to have a happy retirement.”
