Happy returns? Don't bank on it: The performances of personal pension investments vary enormously even in the short term, warns Caroline Merrell

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THOUSANDS of people who bought personal pensions from high street banks are only getting average or below-average returns on their investments.

A survey to be published next week by Money Management magazine shows a wide range of performance.

Even over short spans such as five years the difference between the top- performing companies and the bottom can run into thousands of pounds.

A pounds 10,000 investment in the top-performing with-profits office five years from retirement would be worth pounds 19,347, more than pounds 5,000 more than the office at the bottom, Scottish Friendly, and pounds 4,000 more than Royal Life, the second-worst performer, which has sold about 55,000 personal pensions.

Icki Iqbal, Royal Life assistant managing director, said: 'Our charging structure is quite high but we are investing tens of millions of pounds in computer systems that will cut our expenses in half.'

He added that the company was planning to launch a new personal pension as soon as that process was complete.

The high street banks have made big inroads into the personal pensions market by selling to a captive customer base, but, despite the volumes they have sold, their performance remains only average.

Barclays Life, for example, has sold about 250,000 personal pensions. It has a range of eight unit-linked pension funds - pounds 10,000 invested in any of their funds five years ago would be worth between pounds 11,000 and pounds 18,000, half the value of the top-performing fund from Providence Capitol.

Malcom Oliver, Barclays Life marketing director, admitted that the performance of the bank's funds was below average. 'The fund managers made a few decisions five years ago; with hindsight we would do things differently,' he said.

He added said that the investment philosophy of the bank was to deliver safe, average returns. 'Most of our customers are ordinary people,' he said. 'We believe that they are not interested in the high-risk but in high-reward type of funds.'

Midland Life, which has the worst-performing managed fund, has sold 210,000 personal pensions.

Black Horse Life, which sells through Lloyds Bank branches, has a range of eight unit-linked pension funds where pounds 10,000 invested over five years ago would be worth between pounds 11,000 and pounds 14,000 at retirement - less than half the amount offered by the top-performing companies.

It refused to comment on figures or say how many personal pensions it has sold. However, at one time it was the fastest-growing unit-linked life office.

The survey found that the different charges levied by life offices can make a huge difference to projected payouts.

Over short terms this difference amounts to only a few thousand pounds, but over 25 years the charges can make a difference of tens of thousands.

On with-profits polices the lowest charges were levied by Britannic Assurance. This was the only company to appear in the top five in terms of low charges and in the overall top five for performance.

Highest charges were levied by Royal Life on its with-profits funds.

On unit-linked funds some of the lowest charges were levied by Abbey National Life, Axa Equity & Law, Legal & General and Scottish Amicable. At the other end the highest charges were by Scottish Provident, Gartmore, Hearts of Oak, Acuma Life and Royal London.

----------------------------------------------------------------- TOP 10 MANAGED FUNDS ----------------------------------------------------------------- One off premium of pounds 10,000 over 5 years pounds NFU Mutual 18,525 Skandia Perpetual 17,523 Britannic Assurance 17,406 Wesleyan 16,851 Britannia Life 16,633 Mercury Life* 16,555 Tunbridge Wells 16,507 Scottish Provident 16,291 National Mutual 16,205 Allchurches income builder 15,947 Worst Midland Life 10,847 ----------------------------------------------------------------- * Commission-free plan -----------------------------------------------------------------

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