Pension funds vary wildly in performance

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SAVERS planning to start a personal pension can expect wide variations in performance between different companies, according to a survey by a top personal finance magazine.

Although several companies offer above-average fund performance in certain investment areas, they are not always consistently good over different time spans, says the Money Management survey.

It singles out companies such as Abbey Life, Equitable Life, GA Life, London Life, National Mutual and Scottish Amicable as potential best buys for those considering monthly premiums.

For those planning to pay one-off lump sums into their pension plans, National Mutual, Norwich Union, Scottish Amicable and Scottish Equitable come top the best-buys.

In each category, the Money Management tips are based on a combination of performance and below-average charges, which can have a big impact on the final pension that is payable.

The survey, out this week, is a six-monthly follow-up to the annual results the magazine publishes in October.

The survey looks at how many times a company's fund appears in the top quartile of all providers, how many times in the middle rankings and how many in the bottom quarter.

For example, in the with- profits pensions section of the survey, National Mutual had several top and middle quartile rankings, with no bottom quarter performances.

A single premium of pounds 10,000 would have paid pounds 18,510 after five years, pounds 42,580 after 10 years and pounds 100,928 after 15 years.

By contrast, Axa Equity & Law, Scottish Life and Sun Life had mainly top and mid-quarter performances - even better in some cases than National Mutual - but were let down by one bottom-quartile set of figures.

Consistent bottom-quartile performances in the same sector were recorded by Britannia Life, Royal Life, Guardian Assurance, National Provident and Scottish Mutual.

In Britannia Life's case, the same pounds 10,000 investment would have delivered pounds 15,340 after five years, pounds 34,287 after 10 years, and pounds 57,210 after 15 years - half the top-performing life company fund.

More than half the people who have taken out personal pensions believe they will be enough to meet their needs when they retire, according to a Gallup survey.

Yet two fifths of those polled pay less than pounds 500 a year towards their personal schemes, despite most of them saying they want to retire on at least 60 per cent of their earnings at age 60.

Brendan Llewellyn, head of marketing at Scottish Amicable which promoted the survey, said an annual contribution of pounds 570 from age 25 - the average amount paid by that age group - would deliver an annual pension of pounds 24,800, assuming retirement at 60 and a 12 per cent rate of return on investment. If returns were 6 per cent, the pension would be just pounds 4,610.