The average default fund fell on average by 5.63 per cent in 2018, which proved to be “a tricky year for pension investors”, according to new research from Hargreaves Lansdown.

In comparison, the most popular pension funds chosen by workplace pension members fell by an average of 2.69 per cent.

Hargreaves Lansdown’s study revealed that the most popular funds chosen by members have on average ‘beaten’ the average return of default funds by 4.08 per cent over the past five years.

Furthermore, the most popular funds chosen have outperformed the average default fund over the past one, three and five years.

In 2018, the chosen funds outperformed the average default fund by 2.94 per cent.

Commenting on the findings, Hargreaves Lansdown senior analyst, Nathan Long said: “No one wants to have to pay money into a pension and most of us could find other uses for that money, so getting your investments to work harder for you instead, giving you a bigger pension at less cost is a brilliant alternative.

“Default funds are the Model T Ford of the pension world. A simple, basic fund designed to be suitable for anyone.

“For most people though, a better solution can be found, be it a sports car or a people carrier.”

Hargreaves Lansdown also found that , modelled on a 22 year-old saver earning £30,000 and retiring at 68, boosting returns by 1 per cent but keeping contributions the same increases the pot at 68 by over £55,000, compared to only around £23,000 if contributions are increased by 1 per cent every year but investment returns remain the same.

Long added: “Take the time to find something more suitable and you could end up with more money in retirement.

“Default funds are the least worst option for the most people in the scheme but are rarely the best choice for any one individual scheme member.”

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