Aegon has defended its policy of automatically transferring certain clients who are one year from retirement into a product which has lost large sums over recent years.
This includes an adviser's client who saw their pension pot shrink by a six figure sum in just three years, FTAdviser understands.
Clients of the Aegon Lifestyle fund are automatically placed into the Scottish Equitable Retirement Plan, which has a 75 per cent allocation to gilts and 25 per cent to cash.
The fund is intended for those who will be buying an annuity within the next 12 months when they enter retirement.
But gilt yields have risen sharply over the past three years, a consequence of both last year's "mini" Budget and latterly the Bank of England's interest rate rises.
This has contributed to the fund losing 41 per cent over the past three years and 30 per cent over the past five years. The fund has lost twice as much as its benchmark over the past five years.
FTAdviser has spoken to one adviser who had a client in the fund for multiple years.
Despite investing only in gilts and cash, the product carries an annual management charge of 1 per cent.
An Aegon representative said the 1 per cent charge was inclusive of the pension charge as well as the fund management fee.
The Lifestyle fund has assets of £8.3bn, while the Retirement Plan fund into which clients are automatically transferred has assets of £640mn.
Adviser client sufffers
One adviser, with whom FTAdviser spoke, said he recently began onboarding a new client who held the Lifestyle fund.
The client has lost more than £100,000 from their pension pot since being transferred into the retirement fund. This is because the client had changed their retirement date after being moved into the Retirement fund, and so spent multiple years in the fund.
The client is in a group personal pension, but only recently became a client of the adviser.
The adviser said the client was “shocked” when they were told by their new adviser how much was in the pot, “because the last time they checked there was a lot more in it". They had also made contributions beyond that.
The adviser said the client was not aware they had been switched, although the Lifestyle fund factsheet literate does state that the switch will happen.
The adviser believes Aegon has an obligation to the client to monitor the portfolio when they see the client has been in the product for multiple years when it is designed to be for one year prior to buying an annuity.
Aegon’s representative told FTAdviser they send out letters to clients advising them of changes in the years before retirement and that each iteration of this letter requires confirmation of retirement age, and offers the opportunity to change retirement age.
On the broader points around the allocation to certain funds, the representative said: “The Scottish Equitable Retirement fund exists as a separate fund structure because the year variant fund (for example 2022) closes at the end of that year. This means that customers who are retiring in 2023 will be moved into the Retirement fund unless they give us an instruction on what they want to do with their savings.
