Royal London is the top performer over the year to 30.6.22 across three out of four investment pathways but Scottish Widows, on the other hand, comes in last across all four investing avenues, according to a new report from Corporate Adviser.
The Corporate Adviser Workplace Pensions into Retirement report finds that for all four investing channels, providers are using dissimilar methods to asset allocation strategy. With four providers holding 100 per cent cash and five holding sizable bond holdings, investment pathway 4 has the most range of strategies.
The assets that annuities are commonly backed by are government and corporate bonds, thus the asset allocation for investment pathway 2, which is intended for consumers who plan to purchase an annuity in the next five years, is concentrated around these assets.
The best performing pathway was Royal London at -8.6 per cent in the year to 30.6.22, while Scottish Widows saw the worst return at -25.05 per cent. It has one of the lowest exposures to government bonds in the sample, at just 31.1 per cent, along with a holding of corporate bonds worth 50.9 per cent and 7.7 per cent in cash.
The lowest gilt holding is held by Legal & General, the second-best performer, with a 3.4 per cent holding. Its approach is diversified across many different asset classes, with 18.8 per cent of it invested in stocks.
Investment Pathway 4—where investors intend to withdraw all of their money within the next five years—shows the most obvious change in approach to asset allocation strategy. All four companies—Aegon, Hargreaves, Aon, and Fidelity—have simple asset allocations that are entirely made up of cash or assets that resemble cash, and all have produced returns for investors that have been close to zero.
With corporate bond holdings ranging from 26 to 100 per cent, Royal London, Standard Life, Aviva, Legal & General, and Scottish Widows have all taken considerable risk with their investment pathway 4 strategies. All of them have experienced a decline in asset values, with Scottish Widows reporting the largest decline with a return of -10.22 per cent.
Investment Pathway 4 savers in the latter category have all experienced financial losses, with Scottish Widows declining 11.01 per cent in the year to June 30, 2012.
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