An analysis of default funds in UK defined contribution pension plans

Byrne, A. and Blake, D. and Cairns, A. and Dowd, K. (2006) An analysis of default funds in UK defined contribution pension plans. Centre for Risk & Insurance Studies, Nottingham.

Abstract

Most defined contribution (DC) pension plans give their members a degree of choice over the investment strategy for their contributions. Many plans also offer a 'default' fund for members unable or unwilling to choose their own investment strategy. We analyse the range of default funds offered by UK 'stakeholder' DC plans, which by law must offer a default fund. We find the default funds are typically risky, but also that they vary substantially across providers in their strategic asset allocation and in their use of lifecycle profiles that reduce investment risk as the planned retirement date approaches. We use a stochastic simulation model to demonstrate that the differences can have a significant effect on the distribution of potential pension outcomes experienced by plan members who adopt the default fund as the path of least resistance.

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• Item metadata

  Item type:	Report
  ID code:	41194
  Dates:	Date Event 2006 Published
  Notes:	CRIS Discussion Paper Series – 2006.VIII
  Subjects:	Social Sciences > Commerce > Accounting
  Department:	Strathclyde Business School > Accounting and Finance
  Depositing user:	Pure Administrator
  Date deposited:	19 Sep 2012 13:40
  Last modified:	11 Nov 2024 15:43
  Related URLs:	Journal or Publication Publisher
  URI:	https://strathprints.strath.ac.uk/id/eprint/41194