Consider the option of changing your retirement investment plan.
In an effort to secure a comfortable retirement, many individuals are taking a closer look at their pension funds and seeking ways to improve their returns. Here's a comprehensive guide on how to compare and switch underperforming UK pension funds for better returns.
**1. Assess Your Current Pension Fund Performance**
Start by reviewing how your current pension funds have fared compared to their sectors and peers. Recent analysis of 282 UK equity funds revealed that nearly 59% of funds persistently underperform sector averages, with many rated 1 or 2 stars for consistent below-average returns [1]. Use independent fund rating services or financial websites to check recent and long-term performance (6 months, 1 year, 3 years, 5 years), risk levels, and star ratings.
**2. Identify Better-Performing Funds**
Look for funds with consistent strong performance across multiple timeframes and sectors. In the 2025 report, only about 35 funds achieved the highest 5-star rating for solid returns [1]. Consider funds recommended by trusted financial guides or rankings of private pension providers that balance cost and returns. For instance, Moneyfarm is noted for best pension performance in 2025, while Hargreaves Lansdown offers good customer service and a wide investment choice [2].
**3. Compare Pension Providers and Charges**
Fees can significantly impact net returns. Compare account fees, dealing charges, and fund management fees among providers like Interactive Investor, Hargreaves Lansdown, AJ Bell, or Vanguard, which offer various investment options including DIY and managed pension accounts [2][3]. Some providers have low fees (e.g., Vanguard’s drawdown plan charges as low as 0.15%), which can improve net growth over time [3].
**4. Understand Your Switching Options**
Check if your pension provider allows you to switch funds within the same scheme without penalties or charge you for transferring your pension to a new provider. When switching providers (e.g., moving to a better-performing SIPP), confirm there are no exit fees and that your new chosen fund options align with your risk tolerance and goals.
**5. Seek Professional Advice if Needed**
Because pension decisions affect long-term retirement income, consider consulting a financial adviser who can provide tailored advice on fund performance, charges, switching implications, and tax efficiency [3].
**6. Make the Switch**
Once you select better funds and/or a provider, initiate the transfer and switch process according to provider instructions, ensuring the timing is right to avoid market timing risks. Monitor your new funds regularly to ensure they continue to meet expectations.
**Summary Table**
| Step | What to Do | Why It Matters | |------------------------------|---------------------------------------------------|------------------------------------------| | Assess current fund | Check performance ratings, sector ranking | Identify underperformance | | Find better funds | Review top-rated funds with consistent returns | Aim to improve growth potential | | Compare providers & fees | Look at charges, investment options | Reduce costs, access better tools | | Understand switching terms | Check fees, rules on switching or transferring | Avoid unnecessary penalties | | Get financial advice | Consult adviser if unsure | Ensure decisions suit your personal goals | | Switch & monitor | Execute fund/provider switch and track performance| Secure better returns over time |
By systematically comparing fund performance and provider charges, and carefully managing the switch process, you can potentially enhance your UK pension returns and better secure your retirement income [1][2][3]. Keep in mind that the cheapest tracker funds now cost as little as 0.3% a year, including platform costs. Some of the largest and most long-standing pension funds closely track the market but charge high fees, resulting in underperformance. If insufficient information is provided, ask for more. Clerical Medical, Phoenix, Scottish Widows, and Standard Life are among the well-known pension providers singled out for criticism. Britain's pension funds have underperformed significantly over the past decade, with nine in ten failing to keep pace with the FTSE All-Share index. Almost three-quarters of UK pension funds have underperformed by more than 10%, and over a third are at least 20% behind. Some funds identified in AJ Bell's research are charging twice as much. Consider seeking independent financial advice if unsure about choosing a new pension provider. Charges are a significant factor in pension fund performance.
- In addition to analyzing the performance of their pension funds, individuals should also evaluate their personal savings and investments to find opportunities for growth and increased returns in their overall financial portfolio.
- By improving the returns on savings and investments, individuals can benefit their personal-finance situation, which in turn may lead to better resources to allocate towards their pensions and securing a more comfortable retirement.
- As part of a comprehensive approach to retirement planning, examining business investment options such as stocks, bonds, or real estate can help supplement pension savings and create additional sources of income for retirement.
