Companies jeopardising pensions of millions

By Jennifer Hill, Personal Finance Correspondent

LONDON (Reuters) - Company pension fund trustees will jeopardise the retirement prospects of millions of workers unless they take a more innovative approach, a report says.

The Pensions Institute at Cass Business School warns that defined contribution (DC) pension schemes will put their employees' retirement prospects at risk unless they introduce more innovative default funds

Typically, more than 90 percent of DC fund members select the default option, because they do not feel sufficiently knowledgeable or confident to make active investment choices, according to the National Association of Pension Funds' annual survey 2006.

However, the Pensions Institute found that most traditional default funds do not match members' needs in terms of asset allocation and risk profile.

David Blake, director of the Pensions Institute, said: "This is the first thorough review of DC investment strategies in the private sector.

"We analysed traditional default fund structures and found them often wanting."

The report comes at a time when the government plans to introduce a national DC scheme -- "personal accounts" -- in 2012, into which all employees not currently in a scheme will be automatically enrolled.

This is expected to bring a further eight million employees into the DC investment environment.