Millions of UK savers could be facing weaker retirement outcomes after new research revealed that the majority of higher-risk pension funds have failed to outperform the benchmark performance of the FTSE 100 over the past five years.
The findings raise fresh questions about how effectively pension providers are managing long-term investments at a time when more workers rely on defined-contribution schemes to fund retirement.
Majority of High-Risk Funds Lag Behind Market Returns
Analysis conducted by investment research firm Investing Insiders reviewed nearly 13,000 workplace and personal pension funds managing more than £1 trillion in combined assets between December 2020 and December 2025.
Funds categorised as medium-high and high risk were compared against the FTSE 100 — widely regarded as a key indicator of the performance of Britain’s largest publicly listed companies.
During the five-year period, the index delivered cumulative growth of around 84.7 per cent.
In practical terms:
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A £20,000 investment tracking the index would have grown to nearly £37,000.
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A £50,000 investment would have increased to more than £92,000.
However, the study found that almost 89 per cent of higher-risk pension funds failed to match those returns.
Out of 7,370 funds assessed in these categories, more than 6,500 delivered weaker performance than the benchmark.
Severe Losses in Some Funds
The research highlighted dramatic differences between top and bottom performers.
One of the poorest-performing funds lost almost all of its value over five years, shrinking by more than 98 per cent. A £50,000 investment in that portfolio would now be worth only a few hundred pounds — representing a massive gap compared with market-tracking investments.
Several struggling funds were linked to emerging markets exposure, property investments and strategies affected by market instability following the pandemic and rising interest rates.
Investment vehicles connected to the collapse of the Woodford Equity Income Fund were also among those that underperformed heavily, reflecting ongoing challenges linked to liquidity and asset valuation.
All of the ten worst-performing portfolios analysed were classed as high risk.
Strong Performers Show Opportunity Still Exists
Despite widespread underperformance, some funds delivered exceptional results.
The best-performing pension strategy analysed achieved returns exceeding 180 per cent across the same five-year period. That level of growth would have turned a £50,000 contribution into more than £140,000.
According to researchers, the difference between choosing a top-performing fund instead of a poor one could exceed £130,000 over five years — highlighting the importance of fund selection.
Antonia Medlicott, founder of Investing Insiders, described the gap between outcomes as concerning for everyday savers.
She said many people assume their pension investments steadily grow in the background, but performance can vary widely even among funds with similar risk labels.
Why Pension Funds Don’t Always Match the FTSE 100
Industry experts note that direct comparisons with the FTSE 100 have limitations.
Unlike a single stock market index focused on large UK companies, pension funds are typically diversified across:
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Global equities
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Government and corporate bonds
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Property investments
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Alternative assets such as infrastructure or commodities
This diversification is designed to reduce volatility rather than maximise short-term gains.
However, analysts say asset allocation decisions and management fees can still significantly affect long-term results.
Rising borrowing costs, geopolitical tensions and economic uncertainty since 2021 have also impacted global markets differently, contributing to uneven performance.
Retirement Savings Under Growing Pressure
The findings come at a time when defined-contribution pensions increasingly determine retirement income for UK workers.
Unlike older defined-benefit schemes that guaranteed payouts, modern pensions depend heavily on investment returns.
Experts warn that underperforming funds could leave savers facing unexpected shortfalls later in life if portfolios are not reviewed regularly.
Calls are growing for pension providers to offer clearer communication about performance and risks, alongside stronger default investment options for workers who do not actively manage their savings.
What Savers Can Do Now
Financial advisers recommend several steps to protect long-term retirement outcomes:
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Review pension statements annually.
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Compare fund performance against benchmarks.
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Check investment fees and risk exposure.
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Consider diversification across regions and asset classes.
While high-risk funds can offer stronger growth potential, the latest research suggests that risk labels alone do not guarantee better returns.
As markets continue to evolve, experts say informed decision-making and transparency will play a crucial role in helping savers secure stronger financial futures.
