This chart shows the risk/return data over three years to the end of Q2, 2024, of the investments in the default for an older saver, with 5 years to State Pension Age. The Corporate Adviser Pensions Average (CAPA) is the average performance over the period for all schemes for which data is available.

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The Corporate Adviser Pensions Average (CAPA) is the average (mean) return delivered by defaults known to us, over set time frames. It covers the performance of the strategies of more than 95 per cent of the entire master trust market, as well as those of key life insurers active in the provision of workplace pensions. It covers investments by more than 10 million UK pensions savers.

We have calculated CAPA Index figures over 1, 3 and 5 years both for the part of the default serving a scheme member 30 years from SPA/ selected retirement age, and that part serving a member 5 years from SPA/ selected retirement age. Performance is calculated gross, ie before charges have been deducted, as this allows us to focus on the investment skill of the default strategy, and because some providers levy different charges from different employers.

The CAPA Average is only part of the picture when it comes to judging whether a scheme is good or not. Being below the CAPA Index does not mean a scheme is failing. The CAPA Average should be read in conjunction with the variety of other performance metrics available to professionals analysing default funds. However, consistent significant underperformance of the CAPA Average benchmark through multiple parts of the economic cycle should raise concerns amongst trustees, IGCs, advisers, employers and ultimately members.

Measuring performance in workplace pensions is complicated by the issue of risk. Just because a scheme has achieved the highest returns doesn’t mean it is necessarily ‘the best’. Different schemes take higher or lower levels of risk, dependent on the extent to which their members are likely to be able to tolerate volatile returns, and the investment philosophy of the trustees of the scheme. In rising markets, schemes with a higher risk investment strategy will tend to do better than those with a more cautious approach. In falling markets, the reverse is typically true. Better schemes will endeavour to achieve higher returns with a lower level of risk, as highlighted in the risk/return tables on this site.

Short-term performance can vary wildly. A longer period of performance data is a better guide to overall quality of the default strategy. Different schemes are expected to perform differently at different points of the investment cycle.