Pension funds fall at the post: Bacon & Woodrow's annual survey recommends only three companies

Only three of the 193 pensions analysed by a leading actuary passed its stringent quality tests.

Bacon & Woodrow's annual survey recommends Standard Life, National Mutual Life and Sun Life.

The company subjected all the widely available unit- linked pension funds to a series of stringent screening tests based on performance and charges.

The first screening looked at the performance of all funds over five years assuming clients paid fees rather than the advisers being rewarded by commission.

That knocked out those that delivered below average performance. These included Canada Life, London Life, Save & Prosper, Legal & General and Provident Life.

The first stage of the screening process also knocked out two companies' funds - from Scottish Widows and Rothschild Asset Management - which were recommended last year.

However, Bacon & Woodrow believes that one year's poor performance will be rectified, and recommends that existing clients should continue paying premiums into those policies.

The survey went on to exclude funds that showed a higher than normal degree of volatility, with the result that only 23 out of the original 193 went on for further analysis.

Bacon & Woodrow then examined the remaining pensions charging structure and product features, using criteria such as fund size and transfer penalties.

It weeded out those funds with under pounds 20m under management because it felt that these funds would not be able to provide full investment diversification without an increase in fees, and dropped funds that had early retirement penalties.

Those that failed to pass this screening process included pension funds from Clerical Medical, Friends Provident, London & Manchester and Norwich Union.

The three surviving pension fund providers were then analysed for their suitability for rebate-only personal pensions, single-premium investment and regular premium investment over different terms.

National Mutual Life was considered to be best for rebate-only pension business, with Sun Life being considered more suitable for longer- term contracts.

The survey did raise one concern on Standard Life. It pointed out that monthly policy fees have risen by more than a third over five years.

A senior consultant in Bacon & Woodrow's private client department, Andrew Warwick- Thompson, said: 'We told Standard Life that this was not acceptable and that while their contract remains competitive, we will be keeping their policy pricing under review.'

The survey costs pounds 250 and is available from Bacon & Woodrow, Ivy House, 107 St Peter's Street, St Albans, AL1 3EW.