Nine out of 10 savers remain in a default fund throughout their retirement saving lifetime, Defaqto has revealed.

While this appears to be a high number, financial information business Defaqto has noted that the most widely used default funds for auto-enrolment vary significantly.

According to its How to analyse auto-enrolment default funds? report, the most commonly used default funds vary in terms of benchmark, manager structure, investment approach (active, passive or both), levels of diversification and performance.

As a result of the wide variation, Defaqto suggested that advisers look to recommend the right auto-enrolment scheme for their clients. This decision can be made by carrying out an assessment of the fund that includes all of the elements by which these funds vary.

Advisers need to be able to give evidence of value for money, which “does not mean the cheapest solution, neither does it mean the best performing fund, but rather an assessment that includes these elements but ultimately creates a good outcome for the consumer,” the report said.

Defaqto insight analyst for wealth, Richard Hulbert said: “Auto-enrolment default funds will affect the retirement standard of living for millions of us. This is the first time many of these funds have been publicly scrutinised and compared and the findings are really quite revealing. As a result of this study I hope that more auto-enrolment schemes will be recommended based on impartial analysis and facts that evidence ‘value for money’, enabling savers to enjoy a better standard of living in retirement”.

Defaqto, insight analyst for funds, Patrick Norwood added: “With some of these attributes, such as manager structure and investment approach, the choice of provider and fund might come down to the investment beliefs of the employer or their adviser. In terms of the other more objective features, namely risk-adjusted performance and charges, some providers and funds are clearly more competitive than others.”

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