JLT Employee Benefits revealed that employees who have been auto-enrolled into the lowest performing defined contribution (DC) default funds have been losing out on approximately 6% return per year, or approximately £500,000 over a lifetime.

Aside from pointing out the differences between the lowest performing and the top ten defined contribution default funds, the research also uncovered massive variations in volatility levels ranging from 5.3% to 11.3%.

According to human resource experts, this clearly outlines the importance for companies to choose the best default strategy and the best provider for their employees when they are setting up DC pension schemes. It also defines the importance of monitoring performance on the default fund. While it is understood that providers and default strategies are initially chosen for a reason, it is becoming increasingly more obvious that these things should be regulated on a consistent basis to account for any changes in regulations and other variable factors.

When an employee is unknowingly losing out on a 6% return per year, their retirement funds could be severely affected, having an adverse effect on their quality of living later in life.